Question

How international monetary system advanced the economic globalization?

Answer 1

INTERNATIONAL MONETARY SYSTEM

Let us first discuss about what does the international monetary system means and what is the primary aim of such a set up. The International monetary system refers to a set of rules or the regulations that were made, accepted and agreed by nations for the smooth running of the international trade among different nations. And also to ensure the proper functioning and fair practices among different nations when they participate in the international trade. At present it is also to ensure the security and protection of the investment made by companies out of their home country is also important. The exchange rate of currency is also an important factor in the international trade, when the nations use different currencies for the transactions. The movement of capital and labor has to be maintained in fair manner is also their important function.

The economic globalization indicates the economic integration and interdependence between the nations resulted by the practice of international trade relations between the nations. Now not a single nation can withstand itself but the nations depends on each other. There exists international trade relations between the nations so each nation will depends on each other for their smooth running. By the initiation of the international trade now the situation is that countries specialize on some products in which they can produce at a lower production cost and they will import the goods which is available at low cost from other countries. There exists international trade relations between the countries from the very ancient time, and there exists evidence for such trade relationship. But after forming the different countries the trade between the nations become complicated and there arises a need for the formation of new institutions to regulate the trade, and formed different institutions to regulate the trade. Bimetallism ( exchange of metals between the nations for the international trade), gold exchange standard, Bretton woods systems was previously involved for regulating the trade and exchange. In the modern era there exists International Monetary Fund, World Bank for such control and they are included as a part of international monetary system.

The international monetary systems existed in the world in different times at different forms facilitate the trade relationship and other practices among the nations and also it resulted in the flourish of international trade among different nations. This results in the interdependence or the integration of the trade among the nations or in other words we can simply refer it as the economic globalization among the various nations in the modern world. The international supply chain, the loans from the World bank to different nations and other practices will increase this inter relation between the nations in a wide manner. The practices for increasing this relations are undergoing in the present times in a broad manner. So here by all of these the international monetary system advanced the economic globalization.