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Brief History of Indian Monetary System

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A Brief History of the International Monetary System
Kenneth N. Matziorinis

1.

Introduction

The international monetary system is the structure of financial payments, settlements, practices, institutions and relations that govern international trade and investment around the world. To understand the international monetary system, we can start by looking at how a domestic monetary system is structured. The Canadian financial system, for instance, is composed of a) a currency; b) a central bank which issues that currency; c) financial deposit-taking and lending institutions such as commercial banks and d) the Canadian Payments Association. The currency used in Canada is the Canadian dollar. It is the means of payment, store of value and unit of account for all transactions conducted within Canada. It is the currency in which all assets and liabilities are measured. As such, exchange rates are not an issue in our domestic transactions. The country’s central bank, is the Bank of Canada. Its role is to issue the currency of the land, the Canadian dollar, to manage the supply of money to ensure that there is neither too much of it that could cause inflation, nor too little that could cause recession and to oversee the financial system, acting as a lender of last resort when the need arises. Commercial banks and other non-bank financial institutions are the main players in the financial system. They engage in the process of financial intermediation, which is the taking of deposits from the private public that has a surplus of money and making loans to the public that has a shortage of money. In addition, commercial banks provide payment services such as chequing accounts, bank drafts, debit cards, credit cards, electronic payments, wire transfers and engage in the purchase and sale of foreign exchange. The Canadian Payments Association (CPA) is the payment system

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