2 Multiple exchange rates In this system a government sets different exchange

2 multiple exchange rates in this system a government

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2. Multiple exchange rates – In this system, a government sets different exchange rates for different types of transactions. 3. Import deposit requirement – Some governments require an import deposit, that is, a deposit prior to the release of foreign exchange. 4. Quantity controls – With quantity controls, the government limits the amount of foreign currency that can be used in a specific transaction. 5 / 10
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International Business Management Module – 8 The International Monetary System In 1944 major western countries met at Bretton Woods, New Hampshire, USA, to determine the international institutions that were needed to bring relative economic stability and growth to the free world. As a result of the meetings, the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) popularly known as the World Bank were organized in 1945. International Monetary Fund (IMF) was to provide short-term assistance to correct the balance of payment disequilibrium while the IBRD or the World Bank was to provide long-term assistance for the reconstruction and development of the economies of member countries. International Monetary Fund (IMF) The IMF was organized to promote exchange rate stability and facilitate the international flow of currencies. Its objectives are: To promote exchange rate stability for currency conversions To maintain orderly exchange rate arrangements To avoid competitive currency devaluation To establish a multi-lateral system of payments To eliminate exchange restrictions To create standby reserves Its functions are: It aims to reduce tariffs and other trade restrictions It gives technical advice to members regarding monetary and fiscal policies It functions as a lending institution of foreign currencies It provides machinery for altering the par values of the currencies in order to improve long-term BOP (Balance Of Payment) position of the member countries It conducts research studies and publishes the reports It conducts short-term training courses for the employees of member countries on fiscal, monetary and BOP through its various departments, and the IMF Institute. Its Organization structure is given below. Board of Governors – Member countries appoint one governor and an alternate governor to this board. The governor has votes based on that country’s quota, which he can exercise in this board. The alternate governor has the voting right only when the governor is absent. Executive Board – It has 21 members; one each from USA, UK, France, Japan, Germany, and Saudi Arabia, plus 15 elected members. The board has a managing director. This Board looks after IMF’s day-to-day business. Apart from the above there are two committees. They report to the Board of Governors. They are: 1.
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