Dr Ratih Hurriyati, MSi2008

Apa sistem moneter internasional? Menetapkan aturan oleh negara-negara yang nilai dan

pertukaran mata uang mereka Gold Standard (1821-1931)

Negara akan setuju untuk membeli atau menjual mata uang mereka untuk ditukar dengan emasMata uang negara masing-masing memiliki nilai nominal tertentu

Menciptakan sistem kurs tetap, karena setiap kabupaten mengikat nilai mata uangnya dengan emas

Standar emas interupted selama Perang Dunia I, tetapi kemudian dipertahankan sampai tahun 1931 ketika Bank of England memungkinkan pound melayang

Era Bretton Woods Setelah runtuhnya standar emas, banyak

negara berusaha devaluasi mata uang mereka

Negara juga mengembangkan kebijakan perdagangan restriktif

Tarif tinggi pada impor, kuota impor

Problems Since devaluations were only allowed after a long run

of BOP deficits, they could be predicted by speculators and were large

This didn’t really lead to a stable climate for world trade Currencies would remain constant for long periods

and then change drastically, rather than gradual changes

Since the U.S. $ defined the value of gold, the U.S. could not devalue it’s currency

U.S. ran persistent BOP deficits in the 1960s U.S. started running out of reserves to finance BOP

deficits and the system collapsed in 1971 Exchange rates have been under a dirty or managed

float since 1973

Both created by Bretton Woods IMF

Set up to police and manage international monetary system

Countries join the IMF by paying a quota Gives voting power in the IMF Allows borrowing from the IMF (25% of quota) Counts as official reserves of a country

World Bank International Bank for Reconstruction and

Development Owned by 184 member countries Originally formed to finance reconstruction of Europe

from WWII Now to build the economies of developing countries

Provides loans aimed at stimulating economic growth – often infrastructure like highways

Hard loan policy Reasonable expectation that the loan will be repaid

Three other organizations within the World Bank International Development Assoc. (IDA)

Soft loans – signif. risk of no repayment Interest free loans Focus on least developed countries

International Finance Corp (IFC) Debt and equity financing for promising private sector

activities in developing countries Multilateral Investment Guarantee Agency (MIGA)

Insurance for private investors in developing countries for noncommercial risks – politicial risk

Regional Development Banks Focus on specific regions

Advantage of fixed exchange rates Reduced risk to foreign trade

Businesses importing goods may experience higher prices in the future – deprec. of domestic currency

Businesses exporting goods will experience a similar risk – concerned with apprec. of domestic currency

Uncertainty regarding exchange rates could inhibit trade

Qualifier to this advantage – exchange rates were really not very stable under Bretton Woods

Disadvantage of fixed exchange rates LACK OF CONTROL OVER DOMESTIC

ECONOMY BOP deficits or surpluses adjust with S and D

rather than exchange rates Explain under gold standard Explain under Bretton Woods

The institutional arrangements that countries adopt to govern exchange rates.

Dollar, Euro, Yen and Pound “float” against each other. Floating exchange rate:

Foreign exchange market determines the relative value of a currency.

Some countries use other institutional arrangements to fix their currency’s value.

Some countries use: Pegged exchange rate.

Value of currency is fixed relative to a reference currency.

Dirty float. Hold currency value within some range

of a reference currency. Fixed exchange rate.

Set of currencies are fixed against each other at some mutually agreed upon exchange rate.

Require somedegree ofgovernmentintervention.

Roots inmercantile

trade.Inconvenient to ship

gold, changed topaper - redeemed

for gold.Seeking a

“balance of trade”equilibrium.

Pegging currenciesto gold and

guaranteeingconvertibility.

Trade Surplus

GoldIncreased

money supply = price

inflation.

Decreased money supply

= price decline.

As prices decline, exportsincrease and trade goes

into equilibrium.

1944: 44 countries meet in New Hampshire. Fixed exchange rates deemed desirable.

Agree to peg currencies to US dollar that is convertible to gold at $35/oz.

Promise not to devalue currency for trade purposes and will defend currencies.

Created: World Bank International Monetary Fund.

Want to avoid problems following WWI. Discipline:

Fixed rate imposes discipline: Need to maintain rate stops competitive

devaluations. Imposes monetary discipline, curtailing inflation.

Flexibility: Lending facility:

Lend foreign currencies to countries having balance-of-payments problems.

Adjustable parities: Allow countries to devalue currencies more than 10%

if B of P was in “fundamental disequilibrium’.

International Bank for Reconstruction and Development (IBRD).

Rebuild Europe’s war-torn economies. Overshadowed by the Marshall Plan.

Turns to ‘development’. Lending money to Third World nations.

Agriculture. Education. Population control. Urban development.

IBRD raises money in bond market and lends at ‘market rate’.

International Development Agency raises money through subscriptions

and lends to very poor countries.

Jamaica Agreement - 1967 Floating rates acceptable. Gold abandoned as reserve asset. IMF quotas increased.

IMF continues role of helping countries cope with macroeconomic and exchange rate problems.

Floating: Monetary policy autonomy.

Restores control to government.

Trade balance adjustments.

Adjust currency to correct trade imbalances.

Fixed: Monetary discipline. Speculation.

Limits speculators. Uncertainty.

Predictable rate movements. Trade balance adjustments.

Argue no linkage between exchange rates and trade.

Linkage between savings and investment.Which system is better?

Evidence is unclear.