The Evolution of the International Monetary System: Impacts on Multinational Firms and Global Trade

Abstract

The International Monetary System is a global system that regulates money transfers between different nations. It includes currency exchange rates, regulation of international payments, legislations on capital movements, and worldwide financial organizations, including the IMF. The paper analyses how the change over time of the International Monetary System (IMS) affects the international trade and MNCs. Thus, from the Bretton Woods new exchange regime established in 1944–1971 to the current floating exchange rate system, it has been analyzed in regard to the IMS's historical development. Because of the increasing volatility in the currency rate, this has consequently had an impact on the stability of international transactions and trade volumes. The IMS study investigates exchange rate systems, capital flow regulations, and the role of international financial organizations, including the IMF. For its methodology, the study resorted to a mixed-method approach, combining numbers analysis-that includes regression models and time- series data on exchange rates, amounts of international trade, and MNC performance-with analysis of the historical record and inspection of IMF policy documents. The study shows that trade goes down during big financial troubles, like the Asian Financial Crisis in 1997 and the Global Financial Crisis in 2008. It also shows that changes in exchange rates make global trade smaller, especially during these crises. Also, while IMF help, such as structural adjustment programs, often causes short-term problems for multinational companies (MNCs), like less foreign direct investment (FDI), these policies usually help stabilize economies and lead to recovery in the long run. The outcomes indicate how the IMS, international trade, and multinational corporations are intertwined. Acquainting oneself with the fluctuating money system is very crucial because it enables a person to make informed decisions about the world economy. Keywords: International Monetary System (IMS), Exchange Rate Volatility, Multinational Corporations (MNCs), International Trade, International Monetary Fund (IMF)