But under the floating agreement, narrow and managed daily is necessary on the compromise between the amount of intervention and the size of the movement in the exchange rate. In the absence of such detailed coordination, the risk is obvious that the authorities that are denominated in their settlement currency (i.e. payment) say, “We should not have intervened so strongly, but we should have allowed the course to move further. That is why we will only pay half of these balances. In Rome, in January 1974, ministers decided to focus on immediate measures to support the functioning of the international monetary system during an “interval.” It was not until the Jamaican meeting in January 1976 that a final agreement was reached on a set of interim measures. This leads me to what I consider to be a fundamental error on the part of the Bureau. The Committee was naturally confronted with the two unresolved fundamental problems mentioned above, namely the reform of the exchange rate system and the control of the creation of international liquidity in the form of reserve and gold currencies. But neither the committee nor the MEPs discussed in detail the future exchange rate regime. This is quite remarkable, given that the world has moved from a fixed exchange rate system to a variable interest rate system during the Committee`s deliberations. Since world war II, international monetary relations have been inspired by the Bretton Woods agreements of 1944. These agreements created the International Monetary Fund (IMF) to oversee a new code of conduct in international monetary relations and to help countries in difficulty continue to comply with the code by providing temporary financial assistance.
They also created more or less thought-provoking international bank for reconstruction and development, better known as the World Bank, which has played a key role in financing development over the years. Should exchange rates be allowed to go where they want, on the theory that market forces know best how the majority of the university community and, with small qualifications, the current US administration is favourable?17 I certainly do not believe it. Like the interest rate, the exchange rate is what economists call a policy instrument. In other words, these two economic variables are variables whose amount can easily be influenced by official action, not for their own good, but for the positive influence it has on other more important economic variables, such as inflation, unemployment, the international balance of payments, the balance of payments structure (i.e. a surplus of the balance of payments of industrialized countries to finance aid to developing countries). Etc. So what does the Jamaican agreement mean? So far, I have easily used the terms of the Jamaican agreements, including all the measures agreed since Rome`s decision not to undertake comprehensive reforms. Indeed, the agreement contains a comprehensive set of measures. As early as January 1975, at the second meeting of the “interim committee” (which had been replaced by the reform committee of the 1920s), agreement was reached on parts of the package, so that there were only a few final issues left to resolve in Jamaica.