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International Finance TY BMS Gold Standard Systems Prof. Dipak Abhyankar 9820321404.

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Presentation on theme: "International Finance TY BMS Gold Standard Systems Prof. Dipak Abhyankar 9820321404."— Presentation transcript:

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2 International Finance TY BMS Gold Standard Systems Prof. Dipak Abhyankar

3 Note Be sure that the speakers are on!

4 Exchange Rate Regimes Dipak Abhyankar

5 Barter System Advantage No Government Intervention No Paper Currency No ‘managed’ inflation

6 Limitations Divisibility Barter System

7 Limitations Divisibility Barter System Stocking Value for long

8 Limitations Divisibility Stocking value for long Fair price discovery Barter System

9 Experiments …… Sea Shells Clay Tablets Precious Stones

10 Gold and Silver MonometalismBimetallism

11 Gold Standard Systems Gold Specie Standard Actual Use of Gold Coins

12 Gold Specie Standard Actual Use of Gold Coins Advantages People are using real value No certification required Exchange Rate is simple and stable =

13 Gold Specie Standard Actual Use of Gold Coins Limitations Larger Space requirement for stocking Inconvenient to Carry Risk of Theft

14 Gold Specie Standard

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16 Gold Bullion Standard

17 Currency is ‘pegged’ with Gold with a specified quantity Pegged

18 Gold Bullion Standard Unconditional Promise to convert Fiat Currency to Gold Pegged

19 Gold Bullion Standard Advantages Controlled Money Supply Anti Inflationary Exchange Rate is simple and stable Carries advantages of Divisibility, Stocking of credits and easier pricing Pegged

20 Gold Bullion Standard Disadvantages Inflationary measures are not possible, and hence full employment and growth objectives are not achieved Difficult to honor unconditional promise in war and crisis Pegged

21 Gold Exchange Standard Currency in Gold Exchange Standard is pegged with another currency with specified equation [Currency ‘B’] That another Currency is pegged with gold [Currency ‘A’] Currency ‘B’ is in Gold exchange standard Currency ‘A’ is in Gold Bullion Standard Currency B Pegged Currency A

22 Gold Standard Systems Gold Bullion Standard – Paper (Fiat) Currency Pegged with Gold Gold Exchange Standard – Paper (Fiat) Currency pegged with another currency which in turn is pegged with Gold Gold Specie Standard – `Actual Use of Gold Coins

23 Money is a headache and Money is the cure


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