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International Financial System

             What Is The International Financial System

International monetary systems are sets of internationally agreed rules, conventions and support institutions that facilitate international trade, cross border investment and generally the allocation of capital between nation states. They provide means of payment acceptable between buyers and sellers of a different nationality, including deferred payment.

To operate successfully, they need to inspire confidence, to provide sufficient liquidity for fluctuating levels of trade and to provide means by which global imbalances can be corrected. The systems can grow organically as the collective result of numerous individual agreements between international economic actors spread over several decades. Alternatively, they can arise from a single architectural vision as happened at Bretton Woods in 1944.

Domestic monetary policy frameworks dovetail and are essential to the global system. the well-functioning system promotes economic growth and prosperity through the efficient allocation of resources, increased specialization in production based on comparative advantage, and the diversification of risk. It also encourages macroeconomic and financial stability by adjusting real exchange rates to shifts in trade and capital flows.

International Financial System 

To be effective, the international monetary system must deliver both sufficient nominal stability in exchange rates and domestic prices, and timely adjustment to shocks and structural changes. Attaining this balance can be very difficult. Changes in the geographic distribution of economic and political power, the global integration of goods and asset markets, wars, and inconsistent monetary and fiscal policies all have the potential to undermine a monetary system. Past systems could not intent systemic countries to adjust policies in a timely

MBA 3rd Sem IF (International Finance) Study Materials Pdf Download

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