Debt, Growth, and Poverty in the International Monetary System

This paper explores the relationship between debt, growth, and poverty and the international monetary system. With a well-functioning international monetary system, economic policy works well, instruments are assigned to targets appropriately, and discipline is maintained. The fixed exchange rate is contrasted with alternative monetary rules. The monetary rule is the weakest system; monetary targeting has failed in every country in which it has been tried. An advantage of the fixed exchange rate is the clue it provides to the price level, interest rate, and future monetary policy. Other things being equal, the use of a currencies basket is inferior to a single currency peg, while a freely floating exchange rate system puts itself at the mercy of speculators. The paper points out the conditions for a successful currency area as a consensus on a common inflation rate; a common basket of goods with which to measure inflation; exchange rate that must be locked; member countries must adopt a common monetary policy; and a formula must be devised for distributing and using the seigniorage profits from monetary expansion. There is a need to study the possibility of an Asian currency area and the links between the APEC and the SAARC. Regular and mutual surveillance on monetary, fiscal, and exchange rate convergence, and policies that minimise exchange rate uncertainty and work towards a currency club area based on a common anchor— initially the dollar—are needed. Setting up of an Asian Monetary Fund is also suggested, one that is closely modelled on the original IMF articles of agreement and will provide an anchored fixed exchange rate system.

De la surévaluation du dollar canadien

Le dollar canadien est présentement (en 1990) surévalué. Les autorités canadiennes devraient le laisser se déprécier promptement à un niveau de 0,78 à 0,80 $ÉU, puis s’engager fermement à le maintenir dans cet intervalle. La position qui est ainsi défendue s’appuie en général sur la théorie et l’histoire monétaires contemporaines, et en particulier sur une critique des arguments spécifiques de la Banque du Canada en faveur du régime actuel des taux de change flexibles.The Canadian dollar is presently (1990) overvalued. The Canadian authorities should let it depreciate promptly to a level of 78 to 80 US cents, and then keep it firmly within this range. The general case is based on modern monetary theory and history. Specific criticisms of the Bank of Canada's defense of flexible exchange rates complete the argument

Currency areas, volatility and intervention

On January 1, 1999, the euro was launched with eleven members and it instantly became the second most important currency in the world. It may prove to be the most important event in the history of the international monetary system since the dollar took over from sterling the role of dominant international currency. For the time being the mainstream of the world economy will be characterized by a tripolarism based on the dollar, euro and yen The new situation raises some old questions: Is the currency configuration of the world economy optimal? How many currencies does the world need? Which countries belong in a currency area? What is the optimum currency area? This paper will discuss the currency composition of the world economy today. It will discuss the prospects for expansion of the major currency areas and the problems arising from the volatility of exchange rates between them. It will argue that a restoration of a system of fixed exchange rates would have to begin with stabilization of the exchange rates between the dollar, euro and yen, and that a step in the right direction would be to evolve policies that provide for intervention in the foreign exchange market

Monetary unions and the problem of sovereignty

Monetary integration involves a consideration of two quite different types or dimensions of sovereignty.One is policy sovereignty, and the other is legal sovereignty. Policy sovereignty refers to the ability to conduct policy independent of commitments to other countries. Legal sovereignty refers to the ability of a state to make its own laws without limitations imposed by any outside authority. Both concepts need to be considered in plans for monetary unions. What are the implications of a change in legal sovereignty when the national currencies of some of the oldest states in the world abandon national sovereignty, and what will they receive in exchange

The birth of coinage

The introduction of coinage marks an important innovation in the history of money and a transition in the development of civilization itself. Sometime in the first millennium BC, coinage was invented, probably in Asia Minor, and it rapidly spread throughout the Mediterranean area. Tradition attributes the invention to Lydia but it quickly became a Greek affair. Wherever Greeks settled coinage followed. In the span of hardly a century the innovation had become established around the Aegean area, Sicily, southern Italy, southern France, Spain, Libya and the Black Sea. It was also taken up by neighboring peoples, including the Persians, the Etruscans and the Carthaginians. Coinage is a subject of interest for many disciplines: history, archaeology, metrology, numismatics, epigraphy, linguistics, classics, metallurgy, history of art, political science and of course economics. Its literature is enormous. Nevertheless, some of the most relevant questions remain unanswered. Why did coins suddenly appear in Asia Minor and the Aegean area in the early seventh century? What is the evidence that coinage was invented in Lydia? What were the early coins used for? Did the device or mark on the early coins guarantee the weight, the purity or the value? What was the purchasing power of the early denominations? Did the coins exchange at their "intrinsic worth" or were they overvalued? How were the coins related to prevailing weight systems? This essay attempts to answer some of these questions and provide an introduction to our knowledge about the invention of coinage

Notes on the development of the international macroeconomic model

Mundell's role in the development of the international macroeconomic model and influences from his predecessors and contemporaries. Closing remarks cover some limitations of the model and opportunities for its use in the future

De la surévaluation du dollar canadien

The Canadian dollar is presently (1990) overvalued. The Canadian authorities should let it depreciate promptly to a level of 78 to 80 US cents, and then keep it firmly within this range. The general case is based on modern monetary theory and history. Specific criticisms of the Bank of Canada's defense of flexible exchange rates complete the argument. Le dollar canadien est présentement (en 1990) surévalué. Les autorités canadiennes devraient le laisser se déprécier promptement à un niveau de 0,78 à 0,80 $ÉU, puis s’engager fermement à le maintenir dans cet intervalle. La position qui est ainsi défendue s’appuie en général sur la théorie et l’histoire monétaires contemporaines, et en particulier sur une critique des arguments spécifiques de la Banque du Canada en faveur du régime actuel des taux de change flexibles.