IS/Econ 13, Winter 2008 Essay Question for second midterm exam: Since the late 19 th century three main international financial and exchange-rate regimes have existed. Identify the main characteristics of each regime (in terms of exchange rates, whether and how money is backed by anything, capital movements, and so on) and the approximate periods during which each one of them prevailed. Sample answer: The three main international financial regimes that have prevailed since the late 19 th century and their main characteristics are the following: 1. The Gold Standard period. Countries that participated in this regime had their currencies backed by gold. The British pound was the dominant currency of that period and exchange rates, given their fixed convertibility to gold, were fixed against one another. This regime favored a significant expansion of international trade and international capital movements until the outbreak of World War I in 1914. During WWI convertibility to gold was suspended and it was re-
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This note was uploaded on 02/20/2009 for the course ECON 62020 taught by Professor Skaperdas during the Spring '09 term at UC Irvine.