1.

What is the relevance of IMF, World Bank, and General Agreement on

Tariffs and Trade (GATT) to the global economy?

The Bretton Woods Conference was held on July 1944, formally known

as the United Nations Monetary and Financial Conference wherein 44

delegates convened in Bretton Woods, New Hampshire. They agreed on the

creation of the two international economic organizations: International

Monetary Fund (IMF) and World Bank or the International Bank for

Reconstruction and Development (IBRD). These institutions are known as

Bretton Woods Institutions. The third entity, the General Agreement on

Tariffs and Trade (GATT), created in 1947 after the Bretton Woods

Conference, this much more informal institutions than the IMF and IBRD

serves as the primary global trade system.

These institutions or the primary global trade system is very important

in the advancement and development of the global economy not just within

certain countries. All are relevant to the global economy for without them

there would be a decline in economic stability that would affect the lives of

billions of people worldwide. The International Monetary Fund and World

Bank are relatively different from each other even though both promote

stability and aims to reducing global poverty. The International Monetary

Fund and the World Bank have been founded just like the United Nations

after World War 2. Why? Mainly because after the war everyone wanted

peace. However, peace on an empty stomach is hard to maintain so these

two institutions were meant to help the economic stability of the world. Both

of them are basically banks but instead by being started by individuals like

regular banks they’ve been started by countries. Most of the worlds’

countries are members of the two institutions. But of course, the richest
 countries are those who handle most of the financing and ultimately those

who have the greatest influence. The IMF and the World Bank were designed

to complement each other. The IMF’s main goal is helping countries which

are currently in trouble and who cannot get money by any other means,

perhaps economy collapse or perhaps their currency is in danger. The IMF in

these cases is kind of like a lender of last resort who you go to when nobody

else is willing to give you money. The world bank in comparison has a more

long-term approach, its main goals revolve around the eradication of poverty

and it funds specific projects which help them reach these goals especially

in poor countries. Unfortunately, the reputation of these institutions has been

twin-like mainly due to practices such as lending to corrupt governments or

even dictators and imposing ineffective austerity measures to get their

money back. If run properly however, they definitely could help make help

the world a better place.

With the importance of the IMF in overseeing the economies of member

countries they can help developing countries in modernizing their economies.

It also monitors global economic trends and developments that affect the

health of the international monetary and financial system. Without these

systems in place there would be a sudden economic and financial crisis,

swings in economic activity, high inflation, excessive volatility in foreign

exchange and financial markets, impede economic growth, and hurt living

standards. Economic and financial stability is both a national and multilateral

concern. This in return gives more importance to the IMF since it promotes

stability, reduce vulnerability, and encourage sustained growth and high

living standards. With economic globalization more and more countries are

being interdependent with each other economically thus improving economic

relations. As the IMF oversees all the economies of its member countries,
they can gather information on those to lend with balance of payment issues,

and gives also practical help. The International Monetary Fund serves to

stabilize the international monetary system and acts as a monitor of the

world’s currencies. IMF works to foster global monetary cooperation, secure

financial stability, facilitate international trade, reduce poverty around the

world, and promote high employment and sustainable economic growth.

On the other hand, the World Bank, also aids in poverty reduction with

developing countries by providing technical and financial support to help

countries reform sectors by also promoting long-term economic development

being beneficial to countries with poor or low economies. Implementation of

specific projects such as building schools and health centers, providing

water and electricity, fighting disease, and protecting the environment all

contribute in the overall development of the economy of a country. The World

Bank Group is one of the world’s largest sources of funding and knowledge

for developing countries therefore providing financing, policy advice, and

technical assistance to governments, political risk insurance, settlements of

disputes to private enterprises including financial institutions, and also

focuses on strengthening the private sector. It would serve to improve the

capacity of countries to trade by lending money to war-ravaged and

impoverished countries for reconstructions and development projects.

Furthermore, the General Agreement on Tariffs and Trade is a legal

agreement minimizing barriers to international trade by eliminating or

reducing quotas, tariffs, and subsidies while preserving significant

regulations. The aim behind GATT was to form rules to end or restrict the

most costly and undesirable features of the pre-war protectionist period,

namely quantitative trade barriers such as trade controls and quotas. One of

the key achievements of GATT was that of trade without discrimination.

This is known as the most-favored nation principle (and it has been carried

through into the WTO). A practical outcome of this was that once a country

had negotiated a tariff cut with some other countries (usually its most

important trading partners), this same cut would automatically apply to all

GATT signatories. Escape clauses did exist, whereby countries could

negotiate exceptions if their domestic producers would be particularly

harmed by tariff cuts.

2. How International Monetary System advanced the economic

globalization?

An International Monetary System is a set of internationally agreed

rules, conventions, and supporting institutions that facilitate international

trade, cross border investment and generally the reallocation of capital

between nation states. It helps in reallocating the capital and investment

from one nation to another. The international monetary system had many

informal and formal stages. For more than one hundred years, the gold

standard provided a stable means for countries to exchange their currencies

and facilitate trade. With the Great Depression, the gold standard collapsed

and gradually gave way to the Bretton Woods system. The Bretton Woods

system established a new monetary system based on the US dollar. This

system incorporated some of the disciplinary advantages of the gold system

while giving countries the flexibility they needed to manage temporary

economic setbacks, which had led to the fall of the gold standard. The

Bretton Woods system lasted until 1971 and provided the longest formal

mechanism for an exchange-rate system and forums for countries to

cooperate on coordinating policy and navigating temporary economic crises.

elements have endured, including a modified managed float of foreign

exchange, the International Monetary Fund (IMF), and the World Bank—

although each has evolved to meet changing world conditions. What is the

need for the international monetary system? With the growing complexity in

the international trade and financial market, the international monetary

system is necessary to assign a standard value of the international

currencies. The rules and regulations set by the international monetary

system to regulate and control the exchange value of the currencies are

agreed upon by the respective governments of the nations. Thus, the

government’s stand may affect the decision making of the international

monetary system. For example, change in the trade policy of a government

may affect the international trade of goods and services.

The international monetary system has helped in the economic

globalization as it forms rules and standards that govern the use and

exchange of money around the world and between countries. Each country

has its own currency as money and the international monetary system

governs the rules for valuing and exchanging these currencies. With this

system in place it can boost the economy of different countries not just

globally. How? By setting a fix exchange rate in global currencies it would be

easier to monitor the economy in terms of finance. Why do economies need

money? Without money, individuals and businesses would have a harder time

obtaining (purchasing) or exchanging (selling) what they need, want, or

make. Money provides us with a universally accepted medium of exchange.

By having an international monetary system it can advance the global

economy by opening doors to businesses and opportunities within different

nations providing profit (money) at their reach to boost their economy.