Explain how all exchange rate regimes must deal with the trade-off between rules and discretion, as well as between cooperation and independence

Question

List and classified two International Monetary Systems based on these four quadrants.
What will be an ideal response?

Answer 1

Answer: 1) Vertically, different exchange rate arrangements may dictate whether a country's government has strict intervention requirements (rules) or if it may choose whether, when, and to what degree to intervene in the foreign exchange markets (discretion). 2) Horizontally, the trade-off for countries participating in a specific system is between consulting and acting in unison with other countries (cooperation) or operating as a member of the system, but acting on their own (independence).
Regime structures like the gold standard required no cooperative policies among countries, only the assurance that all would abide by the "rules of the game." Under the gold standard, this assurance translated into the willingness of governments to buy or sell gold at parity rates on demand. The Bretton Woods Agreement, the system in place between 1944 and 1973, required more in the way of cooperation, in that gold was no longer the "rule," and countries were required to cooperate to a higher degree to maintain the dollar-based system. Exchange rate systems, like the European Monetary System's (EMS) fixed exchange rate band system used from 1979 to 1999, were hybrids of these cooperative and rule regimes.