Chapter 1 Evolution of the International Monetary System 国际金融专业双语教学课件.pptVIP

Chapter 1: Evolution of the International Monetary System History of the international monetary system International gold standard (1880-1914) Characteristics: In the case of a gold standard, Currencies are valued in gold, and all currencies that are pegged to gold are therefore automatically linked to each other, The price is maintained because the government stands ready to buy and sell gold to all customers at the pegged value. International Gold Standard Price-Specie-Flow Mechanism (David Hume) Premises: I. There’s no restraint on the buying and selling of gold within countries, and gold moves freely between countries. II.The money supply is allow to change in response to the change in gold holding in a country. III.Prices and wages are assumed to be flexible upward and downward. outflow of reduction price’s Import gold of Ms fall Export BOP BOP deficit surplus Import price’s Increase inflow of Export rise of Ms gold MV=PQ Limitations of the gold standard The automatic adjustment mechanism needs the governments abide by “the rules of game”. Flexibility in wages and prices is obviously required for this mechanism to work. The mechanism has the material basis that global gold outputs could meet economy development’s need. break-down of the gold standard The international gold standard broke down with the advent of the first world war. break-down of the gold standard In the 1920s, countries permitted a great deal of exchange rate flexibility, and there has been controversy over the extent to which this international monetary system was, in fact, efficient. In the middle of decade, Britain attempted to restore the gold standard, adopting the ol