International Monetary System
Eurocurrencies
Eurocurrencies → domestic currencies of one country on deposit in a second country
- Any convertible currency can exist in “Euro-” form
The London Interbank Offered Rate (LIBOR) → reference rate of interest (can vary due to risk of trade)
History of the IMS
The Gold Standard : 1876 - 1913
●Countries set per value for their currency in terms of gold
●Exchange rates were “fixed”
●Gold reserves were needed to back a currency’s value
The Inter-War years and WWII : 1914 - 1944
●Currencies were allowed to fluctuate in terms of gold and each other
●Selling short →
Bretton Woods and the IMF : 1944
●Currencies pegged to USD which is pegged to gold
●Fixed currencies with margin of 1%
●Devaluation limited at 10%
IMF → key institution in the new international monetary system
