Chapter 2

International Monetary Arrangements

Abstract

International monetary relations are subject to frequent change, with fixed exchange rates, floating exchange rates, and commodity-backed currency all having their advocates. This chapter considers the merits of various alternative international monetary systems, and also provides an interesting and useful historical background of the international monetary system, beginning with the late 19th century when the gold standard began and continuing to present-day systems. International reserve currencies are discussed in detail, with emphasis on the types of foreign exchange arrangements. Major topics covered include currency boards, “dollarization,” choices of exchange rate systems, optimum currency ...

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