The Main Issues of the International Monetary System
Kiumars Arya

Purpose – The purpose of this paper is to identify and express the currency challenges of the international monetary system and how to increase the efficiency of the system in the international financial markets.

Design/methodology/approach – Considering the dominant role of the US Dollar and European Euro in the international monetary system, most countries store these currencies as their foreign exchange reserve that has affected their exchange and monetary policies.

Findings – The results showed that the conflict of economic interests increased between large economies because the international monetary system does not have a significant mechanism to prevent the exchange rate’s manipulations and trade imbalance in the global economy. The currencies of the world’s superior economies, which can form the international currency basket along with the US Dollar are European Euro and Chinese Yuan. Gradually reducing US Dollar share in the international monetary system is necessary because the global economy’s role of China increase rapidly.

Research limitations/implications – The free-floating exchange rate system provides countries with the possibility of adopting their fiscal and monetary decisions with no pressure by the exchange market and proportionate with economic changes and indices inside the country. It eventually reduces the convergence of the economic goals.

Social implications – Particularly regarding the fact, that countries’ adherence to different economic goals, it will increase the problems of current account imbalances in the global economy.

Originality value – The increase of the International Monetary Fund’s supervisory role in the world’s exchange market. The foreign exchange policy must not only supply the interests of the national economy but also does not violate the economic interests of other countries.