The International Monetary System

The monetary and economic disorders of the past fifteen years… are a reaction to a world monetary system that has no historical precedent. We have been sailing on uncharted waters and it has been taking time to learn the safest routes.



  • To explain the fundamental trilemma that affects the design of any exchange rate system
  • To distinguish between a free float, a managed float, a target-zone arrangement, and a fixed-rate system of exchange rate determination
  • To describe how equilibrium in the foreign exchange market is achieved under alternative exchange rate systems, including a gold standard
  • To identify the three categories of central bank intervention under a managed float
  • To describe the purposes, operation, and consequences of the European Monetary System
  • To describe the origins, purposes, and consequences of the European Monetary Union and the euro
  • To identify the four alternatives to devaluation under a system of fixed exchange rates
  • To explain the political realities that underlie government intervention in the foreign exchange market
  • To describe the history and consequences of the gold standard
  • To explain why the postwar international monetary system broke down
  • To describe the origins of and proposed mechanisms to deal with the various emerging market currency crises that ...

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