Global Finance Day 1

Front 1

Question: What is the international monetary system?

Back 1

a set of internationally agreed rules, conventions and supporting institutions that facilitate international trade, cross border investment and generally the reallocation of capital between nation states.

Front 2

•A floating exchange rate system

•A pegged/fixed exchange rate system

Back 2

A floating exchange rate are the price set by the forex market based on supply and demand compared with other currencies. This is in contrast to a fixed exchange rate, in which the government entirely or predominantly determines the rate.

Front 3

•A dirty float

Back 3

Same as a fixed one. •A dirty float exists when the value of a currency is determined by market forces, but with central bank intervention if it depreciates too rapidly against an important reference currency.

Front 4

Question: What role does the international monetary system play in determining exchange rates?

Back 4

•The Bretton Woods system

Front 5

1. The International Monetary Fund (IMF)

2. The world Bank

Back 5

Both is a result of the Bretton Woods.

1. Discipline - Flexibility. Helps economies.

2.The World Bank lends money in two ways, help less developed economies.

Front 6

Question: What caused the collapse of Bretton Woods?

Back 6

•The collapse of the Bretton Woods system can be traced to U.S. macroeconomic policy decisions. • the U.S. financed huge increases in welfare programs and the Vietnam War by increasing its money supply which then caused significant inflation •Speculation that the dollar would have to be devalued relative to most other currencies forced other countries to increase the value of their currencies relative to the dollar

Front 7

Question: What followed the collapse of the Bretton Woods system?

Back 7

a floating exchange rate regime.

Front 8

Floating rates

Back 8

1. Monetary Policy Autonomy

2. Trade Balance Adjustments

3. Crisis Recovery

Front 9

Fixed rates

Back 9

1. Monetary Discipline

2. Speculation

3. Uncertainty

4. Trade Balance Adjustments and Economic Recovery

Front 10

Question: What are the implications of the international monetary system for managers?

Back 10

1. Currency management

2. Business strategy

3. Corporate-government relations