explain two major changes that affected the International Financial System after 1970
Answers
Even the most cursory review of major international economic trends over the past several decades shows there have been revolutionary changes in world financial markets. During the 1950s and 1960s, financial institutions and their regulatory structures in major industrial countries evolved in relative isolation from external developments. During those years, most countries, including the United States, imposed restrictions on international capital movements. Major international institutional agreements after World War II, such as the Bretton Woods agreement and the General Agreement on Tariffs and Trade, liberalized world trade but did little to free the movement of international capital. After the financial disruptions of the 1930s, many had questioned whether free capital flows and liberalized capital markets were even desirable. In the International Monetary Fund, the basic obligation of member nations—their code of good behavior—was framed exclusively in terms of avoiding restrictions on current account payments: that is, payments for merchandise trade, international services, investment incomes and payments, remittances, and official government transfers. Meanwhile, the rules and the philosophy with respect to capital transactions were far different: many countries restricted outward capital transfers either because they preferred their capital to be invested within their domestic economies or because they wished to prevent downward pressure on their exchange rates.