Reform of the International Monetary System
The proposal for international reform that is most important is the International Lender of Last Resort. An international lender of last resort might have the ability to preclude contagion, in which an efficacious speculative attack on one emerging market currency gives rise to attacks on other emerging market currencies, propagating financial and economic disorder as it goes. Taking into consideration that a lender of last resort for emerging market nations is necessitated at times, and bearing in mind it cannot be provided locally, there is a significant justification for an international institution to occupy this role. This can be linked to Mexico's financial crisis of 1994, where the IMF took the role of lender of last resort and offered emergency lending to nations facing financial instability. On the other hand, an international lender of last resort generates risks of its own, particularly the risk that if it is supposed as preparing to bail out negligent financial institutions, it may set in motion unwarranted risk-taking of the kind that makes financial crises more probable (Mishkin 19).
This resolve can be compared to other reforms. One of the upsides to Tobin Tax is that during periods when several nations are experiencing budgetary pressures, owing to financial crisis, the new tax would add to fiscal amalgamation devoid of directly affecting the real economy. In addition, Tobin Tax might also dissuade unwarranted...
However, this reform has its downsides. One of its weaknesses is that the potential for decreased market liquidity and the greater price volatility might follow on. For that reason, the cost of capital might increase and investment decline. What is more, financial transactions are undertaken to wind break risks and Tobin Tax may dissuade these risks and unintentionally diminish stability (Mehta).
Another reform is having a new international reserve currency. One of the strengths of this reform is that taking into consideration the role of the United States dollar in the international system, it is necessary to obtain a substitute that would better safeguard the purchasing power of foreign currency reserves. This takes into account the downfall and demise of the Bretton Woods system and the Triffin Dilemma. However, the shortcomings of this reform is that the main issue with the system is not the specific asset that functions as the international currency but instead the operation of the modification mechanism for coping with international inequities and disparities. The efficacious quest of these policies will necessitate a misrepresentation of prices, of exchange rates, or of the international dissemination of demand. The subsequent excesses and shortfalls will also have values that are inaccurate and as a result cannot be assured (Kregel 5).
d'Arista makes the proposal to…
International Monetary System In world trade, varied national currencies are swapped for each other by means of rules and procedures set by a system called the international monetary system. To delineate a general standard of value for the world's currencies, such a system is believed to be necessary. The global monetary structure has always adhered to the organizational framework of the international discipline. In each stage of the financial capitalism there exists
According to Chancellor Helmut Schmidt the interest rates of the developed countries in the post1990 era were higher than they had ever been "at any time since Jesus Christ" (http://hdr.undp.org/external/HDR_papers/oc3b.htm). In 1983, in Latin America, whose devaluations were enormous, it was recorded that in one year "the effect on the individual private sector, which in [some] cases had been encouraged by the policies of the authorities to borrow, has
These critics argue that the United States and Europe have been the principal financial support for the IMF for over fifty years and that, but for, such support the IMF would long ago ceased to function as a viable organization. Those supporting this view, however, also argue that the IMF has lost sight of its original goal and ventured into new areas that might be best left for others
Foreign Monetary System A monetary system is any structure initiated by the government and mandated to issue currency, acknowledged as the medium of exchange by its citizens and governments of other nations. The central bank manages the monetary system of a country; this same bank has the responsibility of printing money and controlling the economy. Since the colonial period, coins from the European colonies had circulated in all the colonies. The
The IMF currency reserve units are called Special Drawing Rights (SDRs); from 1974 to 1980 the value of SDRs was based on the currencies of 16 leading trading nations. Since 1980 it has been reevaluated every five years and based on the relative international economic importance of the British pound sterling, the European Union euro (formerly the French franc and German mark), the Japanese yen, and the U.S. Dollar."
International Economics Research In the contemporary, there is continued deliberation regarding the future of the International Monetary System. Subsequent to the international economic and financial crisis, compounded with the rise of China as the second biggest economy and circulation of the Euro, there has been deliberation of other currencies joining the U.S. Dollar as the reserve currency of the IMF. This report is an attempt to examine the prevailing position of