The International Monetary System
This section gives a detailed perspective into the evolution of monetary standards and how the value of money is determined. You will learn how the value of money was determined by gold and how the value of money became independent of gold. The Bretton Woods agreement led to the establishment of the IMF and the World Bank. What effects did the Bretton Woods agreement have on currencies?
Post–World War II
Jamaica Agreement
In 1976, countries met to formalize a floating exchange rate system as the new international monetary system. The Jamaica Agreement established a managed float system of exchange rates, in which currencies float against one another with governments
intervening only to stabilize their currencies at set target exchange rates. This is in contrast to a completely free floating exchange rate system, which has no government intervention; currencies float freely against one another. The
Jamaica Agreement also removed gold as the primary reserve asset of the IMF. Additionally, the purpose of the IMF was expanded to include lending money as a last resort to countries with balance-of-payment challenges.