Against the background shaped by developments in the world economy, some of the main problem areas of the international monetary system are now considered under four headings: (1) undisciplined or ineffective national policies; (2) excessive swings in real exchange rates; (3) limited credibility in efforts to manage exchange rates; and (4) deficiencies in the international liquidity system. This section attempts to develop a better understanding of the nature and sources of these problems, and the subsequent section considers what can be done to alleviate them.

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