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Poli 243- Chapter 8 Notes.docx

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Political Science
POLI 243
Mark Brawley

Chapter 8: The Politics of International Monetary Relations th February 12 2013 The Characteristics of Monetary Orders Money performs 3 essential functions:  Serves as a measure  As a medium of Exchange  A store of value (or credit) In studying international monetary regimes, we use 3 main characteristics to describe and compare them:  Exchange rates o Refers to the rules governing how national currencies are traded o Exchange rates can be fixed: political authorities se the rates at which currencies are exchanged o Floating exchange rates: markets are left to determine the rates at which currencies are traded  The nature of reserves: o Two types of Monetary reserves:  Commodity (precious metal such as silver and gold) serves as monetary reserve because they have high intrinsic value recognized internationally: these goods are extremely desirable in their own right  National Currency can be come internationally attractive because it is believed to have value and is widely accepted- requires that foreign holders of this currency have access to the issuing country’s domestic market  International Agency  Convertibility of capital o Refers to how open or closed the international financial system is o Indicates how well national financial markets are integrated According to W.M. Scammell, a successful international monetary system must have 4 integrated parts:  The need for a medium of international exchange  Adequate ties between nations’ financial institutions (In order to utilize the medium of exchange)  Some method (or methods) of managing balance of payments adjustments (some agreed upon technique for paying for goods and service
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