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International Monetary System

Autor:   •  November 23, 2018  •  1,283 Words (6 Pages)  •  164 Views

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Fixed exchange rates provide greater certainty for exporters and importers, which also helps the government maintain low inflation, which in the long run will tend to keep interest rate down and stimulate increased trade and investment.

Flexible exchange rate is an exchange rate which fluctuates depending on the supply and demand of a currency in relation to other currencies. If there is a high demand for a particular currency, its exchange rate relative to other currencies increases, on the other hand, if there is less demand, its value decreases.


International Monetary Fund is an international organization that promote international monetary co-operation, facilitate international trade, foster sustainable economic growth, and make resources available to members experiencing balance of payment difficulties and international financial crises. IMF was formed in July 4, 1944 at the Bretton Woods Conference. The headquarter of IMF was located at Washington D.C., United States.


- Assists member nations in several different capacities. If a country has a balance of payment deficit, the IMF can step in to fill the gap. It serves as a council and adviser to countries attempting a new economic policy. It also publishes papers on new economic topics.

- Ability to provide loans to members nations in need of a bailout. The IMF can attach conditions to these loans, including prescribed economic policies with which borrowing governments must comply.


- The IMF has been criticized for not doing much and for overreaching. It has been criticized for being too slow or too eager to assist failing national policies. Since the US, Japan and Great Britain feature prominently in IMF policies, it has been accused of being a tool for free-market countries only. Simultaneously, free-market supporters roundly criticized the IMF for being too interventionist.

- Some member nations, such as Italy and Greece, have been accused of pursuing unsustainable budgets because they believed the world community, led by the IMF, would come to their rescue. This is no different than the moral hazard created by government bailouts of major banks.



World Bank is an international financial institution that provides loans to countries of the world for capital programs. Official goal of the World Bank is reduction of poverty, however, all its decisions must be guided by a commitment to the promotion of foreign investment and international trade and to the facilitation of capital investment.



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