POLS 1160 Lecture Notes - Lecture 16: 1979 Energy Crisis, World War I, Currency Crisis
22 Mar 2017
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International monetary relations: w/in countries, there is often domestic conflict over monetary policies, among countries, monetary relations are central to a functioning global economy. History of exchange rates: over past 200+ years world underwent large change in global exchange rate environment, 3 distinct periods, 1. Monetary policy autonomy remove obligation to maintain exchange rate parity restores monetary control to a gov: 2. Automatic trade balance adjustments: under bretton woods if country developed permanent deficit in balance of trade that couldn"t be fixed domestically. Imf would bail you out: fixed provides, 1. Provides monetary discipline: ensures a lack of inflation by gov, 2. Reduces uncertainty: promotes growth of international trade and investment. In 1880s, most nations followed gold standard: = 23. 22 grains of gold, gold par value: amount of currency needed to purchase one ounce of gold. What has happened since 1973: exchange rates have been more volatile and less predictable than they were between.
