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The international monetary system is a way to conduct international business.The system covers types of currency from different countries and the resulting exchange rates as well as the characteristics of various exchange rate regimes.The global monetary system initially was quite segmented and hence monetary systems used to be regional.
Until the 19th century，increasing financial market integration and the interdependence of economies have been calling for a feasible set of internationally agreed rules，conventions and supporting institutions to facilitate international trade or cross border investment.International monetary systems thus come into being.By inspiring confidence，providing sufficient liquidity for fluctuating levels of trade and offering means to correct global imbalances，international monetary systems provide acceptable means of payment to traders of different nationality.The international monetary systems have evolved specially over the last century，reflecting ongoing changes in global economic realities and in economic theories.
According to Wang（2005）
，the modern international monetary system has gone through the following 5 stages：
1821 1914 The classical gold standard
1914 1943 Interim instability
1944 1971 The Bretton Woods system
1971 1973 The collapse of the Bretton Woods system
1973 present The recent float
After the collapse of the Bretton Woods system，the prevailing international monetary system is characterized by floating exchange rates，free capital flows and independent monetary policy in the main developed economies.The monetary policy framework also transitioned from a monetary targeting regime in the 1970s and the 1980s to inflation targeting frameworks.Financial sector regulation then moved from an intrusive framework to a light-touch framework.
“International monetary system” is often used interchangeably with terms such as“international monetary and financial system” and “international financial architecture”.Dorrucci and McKay（2015）
defined international monetary system as：（i）the set of conventions，rules and policy instruments as well as（ii）the economic，institutional and political environment which determine the delivery of two fundamental global public goods：an international currency（or currencies）and external stability.
International monetary systems can either be constructed by a single architectural vision such as Bretton Woods System or arise from numerous individual agreements.
In order to contribute to stable and high global economic growth，while fostering price and financial stability，the international monetary system comprises the set of official arrangements that regulate key dimensions of the balance of payments.It thus consists of 4 elements：
① exchange rate regimes；
② international payments and transfers relating to current international transactions；
③ international capital movements；
④ international reserves.
The main strength of today's international monetary system is its flexibility and adaptability.This strength can also become its weakness，as it may contribute to unsustainable growth models and imbalances.International monetary system is like a public goods.When it is functioning smoothly，all countries gain from international flows of goods，services，and capital.But when it breaks down or is poorly organized，nations are unable to sustain high levels of trade and investment.
International monetary system has collapsed 3 times in the past hundred years：in 1914，1939 and 1971.Each collapse was followed by tumults：war，civil unrest，or significant damage to the stability of the global economy.
The modern international monetary system unfortunately has not fully met the essential purpose yet，which is to facilitate the exchange of goods，services and capital among countries.
1） Exchange Rate Regimes
It is desirable that exchange rates should move stably in reflection of economic fundamentals.As discussed in last section，the floating exchange rates introduced by recent international monetary system has brought great volatility since the collapse of the Bretton Woods system.This volatility failed exchange rates to reflect fundamentals between countries.
2） International Payment and Transfer
According to recent data，increased free flow of capital has not brought the expected benefits to the global economy.On the contrary，it enlarged the volatility of exchange rates，destabilized the economies' growth and encouraged speculations.
3） International Capital Movements
As financial markets get more integrated and cross border financial transactions become freer，capital flows are enhanced and their volatilities become more active.Financial crises are more contagious and fatal since the rise of shadow banking system.
4） International Reserves
The birth of Euro has challenged the role of the U.S.dollar as the global economy's reserve currency.However，the currency composition of allocated reserves is still concentrated in the U.S.dollars.
Emerging economies have dominated the surge of reserve accumulation，especially Asian's share that accounts for more than half of the reserve as shown in Figure 1-8，which is a significant imbalance.It confirms that international monetary system has not succeeded in its key objective of growth with stability in the global economy in the post-Bretton Woods regime.
Figure 1-8 Top 8 Countries with the Largest Foreign Currency Reserve Assets as of Jan.2020
Generally，most industrialized countries are now adopted independent floating，but the present international monetary system is a mixture of several kinds of exchange rate arrangements operating in parallel at the same time.Given the emerging markets gain more shares in the world，the global financial crisis of 2008 2009，the follow-on Great Recession and the Euro area sovereign debt crisis and the hit caused by COVID-19，the reforming of the international monetary system has been urgently called for.
This dollar-dominated reserve situation granted the U.S.an effective way to impose the U.S.power without spending money or sending troops：financial sanctions on undesirable foreigners，with tough enforcement through the banking system.Several alternatives to the U.S.dollar payments system have suggested to avoid the U.S.power over dollars，such as gold standard or decentralization digital cash.But the principal banks in the Euro area，the UK or Switzerland are so intertwined with the dollar clearing system that they and the U.S.will be the main obstacles to alternative currency.
A transitional framework for the Chinese yuan as a dollar alternative has been suggested.China has been working on it's currency globalization through a set-up called Cross-Border Interbank Payments System，or CIPS，and bilateral “clearing accounts” with several central banks.But there is a long way to use Chinese yuan on a large scale under capital accounts in terms of saving funds，attracting participants，and others.