9. Flexible Exchange Rate (1973 onwards) Jamaican Agreement: demonetization of Gold acceptable to IMF members Exchange rates floats free based on BOP (Balance Of Payments), hence more volatile US$ as the reserve currency: dependency on dollar for imports Rise of Asian Economy and stagnation of Western Economy
10. Trade between nations The Free Trade Area: Equitable taxes and duties for member nations The Custom Union: Common external trade policies The Common Market: Mobility of Factors of production The Economic Union: Use of common currency (fixed exchange rate among members)
13. Advantages of EMU Significant reduction in Coverage ratio (the number of months that reserves could pay for imports with no other funding) Greater flexibility in trade with respect to movement of goods, services and factors of production across geographies No fluctuations in exchange rates within members leading to stability and remote scope for arbitrage opportunities Equates purchasing power parity of rich and poor nations