A monetary system secures the proper functioning of money by regulating economic agents, transaction types, and money supply.

Monetary systems are traditionally formed by the policy decisions of individual governments and administrated as a domestic economic issue.

International monetary system refers to the system and rules that govern the use and exchange of money around the world and between countries. Each country has its own currency as money and the international monetary system governs the rules for valuing and exchanging these currencies.

The International Monetary System is the structure within which foreign exchange rates are determined, international trade and capital flows are accommodated, and balance of payments adjustments made.

International monetary systems are sets of internationally agreed rules, conventions and supporting institutions, that facilitate international trade, cross border investment and generally the reallocation of capital between nation states.

Flexible /Floating exchange rate

A Flexible /floating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market.

a. When market forces determine the rate, it is called floating exchange rate.

b. Exchange rate determined by supply and demand.

c. Characterized by volatility.

d. Creates uncertainty in conducting international business.

e. Changes in value called appreciation and depreciation.

Fixed/Pegged Exchange Rate

A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold.

a. Broadly when government decides the conversion rate, it is called fixed exchange rate.

b. Central bank buys and sells domestic currency at a fixed price.

c. The gold standard was a fixed exchange rate regime.

d. Bretton Woods was another.

e. Provides more certainty in the short run but the system is susceptible to speculative attacks.

f. Changes in value called revaluation and devaluation.