monetary agreement

monetary agreement,

attempt by two (bilateral) or more (multilateral) nations to regulate and coordinate their financial relations by treaty. The objectives are usually to promote trade by facilitating payment of international debts and to maintain in each nation a stable exchange rate by making available credits to meet temporary difficulties with balance of paymentsbalance of payments,
balance between all payments out of a country within a given period and all payments into the country, an outgrowth of the mercantilist theory of balance of trade.
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. After World War II there was a significant movement toward multilateral monetary agreements, of which the most important were the International Monetary FundInternational Monetary Fund
(IMF), specialized agency of the United Nations, established in 1945. It was planned at the Bretton Woods Conference (1944), and its headquarters are in Washington, D.C.
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 and the European Payments Union (1950). Customs unions such as the European Community (EC) and the European Free Trade Association often require a large degree of monetary cooperation, and the increasing European integration that has transformed the EC into the European Union (EU) has also led to increasing monetary cooperation through the European Monetary SystemEuropean Monetary System,
arrangement by which most nations of the European Union (EU) linked their currencies to prevent large fluctuations relative to one another. It was organized in 1979 to stabilize foreign exchange and counter inflation among members.
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. In 1999 most EU nations adopted a single currency, the euro, which replaced the currencies of 12 member states in 2002; additional EU nations have since adopted it.


See W. M. Scammell, International Monetary Policy (2d ed. 1961).

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