Jamaican Currency System

In the world today operates the Jamaican currency system, the agreement on which was signed in Jamaica in the city of Kingston in early 1976. Its introduction finally abolished the principle of the gold standard and legalized the free floatation (floating) of exchange rates. At the same time, the mechanism of interstate and national impact on the formation of exchange rates has been substantially modified. This system is not based on the currency systems of individual countries (including the United States) - it is based on legally fixed interstate principles.

The adoption of a new system of exchange rates has its own history. In the late fifties and early sixties of the XX century for the United States came a period when increasingly their balance of payments turned out to be negative, the number of dollars abroad increased, and gold reserves began to be depleted. The United States, according to the Bretton Woods Agreements, was forced to meet the growing demand for gold from central banks of other countries. And, considering that the United States had to sell gold for a fixed price of $ 35 per ounce, it is clear that this gradually led to the destruction of the gold reserve.

The abolition of the gold standard, initiated by Richard Nixon in 1971 , and the setting of possible limits on the fluctuation of (nominal) currency values against the dollar in the range of 2.25%, led to considerable volatility in the currency markets. The Bretton Woods system failed to maintain the increase of this interval to 4.5%, and in 1972, in the spring, the United States announced a 10% devaluation of the dollar.

Japan in early 1973 announced a floating rate of its national currency, and somewhere in a month the EU did it. Thus, the "floating" mode of exchange rates from that moment unofficially became prevailing, due to which the volatility of world currencies increased.

The Jamaican currency system initiated the legal free exchange rate fluctuations. Since 1978, the IMF's revised charter came into force, which enables member countries to flexibly maneuver, in particular:

• Members of the fund are exempted from the establishment of currency parities and are entitled to use the "floating" regime of exchange rates;
• Market rates between currencies with an established parity may fluctuate in the interval 4.5% of it;
• Countries that preferred to fix parity for their own currency, can, if desired, move to a "floating" currency regime.

Thus, the Jamaican currency system provided the members of the IMF with a choice:

• Establish a currency "floating" rate;
• Have or maintain a fixed IMF unit in SDR (with special drawing rights), introduced instead of the "gold standard", or other possible settlement units;
• Establish a firm correlation of its currency (bind) to other currencies: one or several.

But the possibility of parity of currencies in gold is completely excluded.

Among the countries that have "floating" exchange rates, we can note the USA, Canada, Switzerland, Japan, Greece, Israel, Great Britain and many others. Quite often, central banks of these countries, with sharp fluctuations, still support exchange rates. That is why the "swimming" of exchange rates is called "managed" or "dirty". In general, the exchange rates of developed countries are in group or pure "swimming".

There are also own regional currency systems, for example, EBU, inside of which originally used the new ECU unit of account, based on the basket of currencies of the countries that were parties to the agreement. In 1999, the ECU replaced the Euro.

At the same time, the Jamaican currency system needs further reform, which is necessary to improve the world currency mechanism, one of the sources of instability of national and world economies.