C. THE INTERNATIONAL MONETARY SYSTEM

While the simple supply-and-demand diagrams for the foreign exchange market explain the major determinants, they do not capture the drama and central importance of the. international monetary system. The 1990s witnessed crisis after crisis in international finance-in Europe in 1991-1992, in Mexico and Latin America in 1994-1995, and in East Asia and Russia in 1997-1998. Although the United States avoided most of the fallout from these crises, this period underlined the importance of a well functioning international monetary system.

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