ABSTRACT
The international financial system consists of the numerous rules, customs, instruments, facilities, markets, and organizations that enable international payments to be made and funds to flow across borders. It includes the international money and capital markets and the foreign exchange market. From an economic standpoint, developments in the international financial system have made financial markets more efficient because funds can more easily flow around the world to wherever they will earn the highest return. In post-World War II period, the international financial system is operated under two distinct exchange rate regimes. The specific exchange rate regime affects the trading of all international financial instruments. This chapter examines the international exchange rate systems in effect since 1944. It discuses the unique role that the dollar still plays in the international financial system. Finally, it looks at the international organizations that seek to provide a framework for financial stability as the cross-border trading of all types of financial instruments continues to grow.
