6.6 Integrative summary: Parts A, B and C
In simple terms this chapter is about money - in three contexts. In Part A we looked at the foreign exchange market. The operative word in that term is 'exchange'. Exchange is the process of converting one national currency into another, but we have noted that this is seldom a straightforward process. Exchange rates vary for the variety of reasons discussed.
In Part B we looked at the international monetary system, of which exchange rates are a part. Part B is to some extent a history lesson. It began with the gold standard, then touched on the Bretton Woods Agreement from which our post World War II international monetary system began. Perhaps the most important elements from Bretton Woods are the International Monetary Fund and the World Bank. Part B concluded with developments since the 1970s, which include the rise of the European Monetary Union and the convergence of the roles of the IMF and World Bank.
Part C investigated the world's capital markets: which agencies have money and how borrowers tap these agencies for money. Perhaps the two most important sections of Part C are those dealing with Eurocurrency, and the rising significance of the commercial capital market which may eventually partially displace the World Bank and IMF.
It seems appropriate at this point to repeat the advice given in the introduction to this chapter '... we are dealing with a large, complex area (three chapters from the textbook!) and you will need to make connections across Parts A, B and C if this chapter does not specifically do it for you'.
Previous Page