What explains the transition from one international monetary system to another?

International monetary systems are significant in today’s economy as it allows businesses and individuals to actively participate in the exchange of products and services across the world. As much as the transition of monetary systems takes place as a business, it has led to increased growth in the economy while at the same time contributing to a country’s development. International transitioning of monetary systems have greatly contributed to increased trade and payments across the world. Before World War I, there were set gold standards for international monetary transitioning which were defined as gold standards for every country. However, there have been improvements, and today there are country-specific standards in relation to each international currency and factors that explain their transitioning. In essence, each country is now free to arrange its exchange rates and that which is acceptable for adoption. Factors such as the need to liberalize market economies, the need to restructure and privatize financial sectors, macroeconomic stabilization as well as legal and institutional reforms are some of the main factors put forth to explain the transitioning from one international monetary system to another.

Market and Financial liberalization are described as a move to free the market for trade. This allows every individual at every corner of the world to undertake trade as they engage in an exchange of goods and services. With the market liberalization, the flow of international currency has been noted to be on the increase among countries as foreigners engage in businesses. This, therefore, means that there have to be systems and policies put in place that would allow for the use of foreign currencies as well as a well-established transitioning system that would allow for the adequate use of foreign currencies. One can imagine performing business in a country with the restricted use of foreign currencies or either inadequate monetary transitioning systems in place. It would mean limited business operations in the country as well as limited international trade. The idea of the market and financial liberation came in as a need to attract more investors and allow for international trade systems. The policies were majorly seen in the developing countries in the past years to allow international business people and individuals have an easy time in operating in the foreign countries. The market and financial liberation have therefore made it easy for governments enact regulations that would allow efficient exchange of foreign currencies and thus making business easier for foreigners and other business people.

Macroeconomic stabilization is also another factor that explains the need for transitioning international monetary systems from one monetary value to another. With the market and financial liberalization, there has been a boom in the business sector as the market were now free for trade. In this case, therefore, there is a need for the government and other agencies in concern to regulate the flow of finances within a country. Furthermore, the high inflation in a country and the burst in the market means that a control system needs to be put in place to ensure that adequate regulation of money in a country. In addition, macroeconomic stabilization means that the government has to put measures that ensure chastisement over the growth of credit and money. This discipline also needs to spread to governmental budget as well as monetary policy as installed by the government. In this case, therefore, the transitioning of international monetary systems as much as it supports economic and development in a country, there is need to have regulatory measures which one of them is how they are transitioned from one system to another. In this case, the need for macroeconomic stabilization is seen to explain the transitioning of monetary system to another.

Restructuring and privatization is another significant explanation for the transitioning of monetary systems from one value to another. Privatization allows individuals to perform own businesses and at a scope of their wish. For instance, restructuring and privatization have made it easy for business people open branches of their businesses across many countries in the world. Moreover, the use of e-business has made it easy for people to perform online businesses as they receive payment in any monetary value. In essence, business people are able to sell their products online and receive payments in any monetary value which in turn they are able to transition to other currencies as appropriate and with efficiency. This fact corroborates with the market liberalization which allows people to perform business in any country of their wish. Considering the importance of restructuring markets and privatization, individuals are able to produce their own products and sell these products in the free market at their own convenience. Similarly, they are able to acquire payments in any currency at the convenience of their clients and exchange these at their convenience. In this case, restructuring enterprises to privatization explain the need for transitioning international monetary systems to another.

Legal and institutional reforms is another attribute for transitions from one international monetary system to another. Though this explanation may be deemed marginal. It points to the need for a state to remain competitive as compared to other states economically. In this case, there is need to put laws and regulations governing transitioning of international money from one system to another while at the same time putting forth adequate transitioning arrangements or rather exchange rates that may see the state remain competitive. Since there are individuals and corporations that are also engaged in monetary transitioning, they have to align their business with the states policies and exchange rates arrangements. On the other hand, developing state policies that allow for monetary exchange improves a country’s economy and therefore improved development.