The Jamaican currency system is functioning today in the world, agreements on which were signed in Jamaica in the city of Kingston in early 1976. Its introduction finally abolished the principle of the gold standard and legitimized the free floating (swimming) of exchange rates. Moreover, the mechanism of interstate and national influence on the formation of exchange rates has been significantly modified. This system is not based on the currency systems of individual countries (including the United States) - it is based on legislatively established interstate principles.
The adoption of a new exchange rate system has its own background. In the late fifties and early sixties of the XX century, the United States began a period when their balance of payments was increasingly negative, the number of dollars abroad increased, and gold reserves began to deplete. The United States, according to the Bretton Woods Agreements, was forced to satisfy the growing demand for gold from the Central Banks of other countries. And, given that the United States was forced to sell gold at a fixed price of $ 35 per ounce, it is clear that this gradually led to an erosion of gold reserves.
The abolition of the gold standard, initiated in 1971 by Richard Nixon, and the establishment of possible limits for fluctuations in the value of (nominal) currencies against the dollar within 2.25%, led to significant instability in foreign exchange markets. The Bretton Woods system was not able to maintain and the increase in this interval to 4.5%, and in 1972, in the spring, the United States announced a 10 percent devaluation of the dollar.
Japan in early 1973 announced a floating exchange rate of its national currency, and about a month later the EU did it. Thus, the “floating” regime of exchange rates from this moment unofficially became predominant, due to which the volatility of world currencies increased.
The Jamaican currency system has laid the foundation for the lawful free fluctuation of exchange rates. Since 1978, an updated IMF charter has come into force, which gives member countries the flexibility to maneuver, in particular:
- members of the fund are exempted from establishing currency parities and are entitled to use the “floating” regime of exchange rates;
- market rates between currencies with established parity may fluctuate in the range of 4.5% of it;
- countries that prefer to fix the parity for their own currency can, if desired, switch to a “floating” currency regime.
Thus, the Jamaican currency system provided IMF members with the opportunity to choose:
- establish a currency "floating" rate;
- to have or maintain a fixed IMF unit of account in the SDR (with special drawing rights) introduced in place of the "gold standard" or other possible units of account;
- establish firm ratios of your currency (attach) to other currencies: one or more.
But the possibility of parity of currencies in gold is completely excluded.
Among countries with “floating” exchange rates, the United States, Canada, Switzerland, Japan, Greece, Israel, the UK and many others can be noted. Quite often, the central banks of these countries, with sharp fluctuations, still support exchange rates. This is why “floating” exchange rates is called “managed” or “dirty.” In general, the currencies of developed countries are in group or net "swimming."
There are also own regional currency systems, for example, EMU, inside which initially used the new unit of account of the ECU, based on a basket of currencies of countries that were parties to the agreement. In 1999, the ECU replaced the Euro.
At the same time, the Jamaican currency system has a need for further reform, which is necessary to improve the global monetary mechanism, one of the sources of instability of national and world economies.
