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Current global imbalances and the Keynes Plan: A Keynesian approach for reforming the international monetary system

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  • Costabile, Lilia

Abstract

This paper proposes a "logical experiment", illustrating how alternative international monetary systems may produce opposite results in the global economy. In the current organisation, "key currencies" work as international money. Keynes, by contrast, proposed that this role should be assigned to a supranational, "credit" money. While the world currently lives in an asymmetric regime, which lead to what has been defined as a "balance of financial terror", Keynes tried to achieve a more peaceful type of "international balance". I argue that the structural reform and the technical provisions proposed by the "Keynes Plan" may still - at least in principle - provide useful remedies for international disequilibria, by remedying the asymmetries of the current international payments architecture and helping to curb both inflationary and deflationary pressures on the world economy.

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Bibliographic Info

Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 20 (2009)
Issue (Month): 2 (June)
Pages: 79-89

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Handle: RePEc:eee:streco:v:20:y:2009:i:2:p:79-89

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Web page: http://www.elsevier.com/locate/inca/525148

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Keywords: Global imbalances International monetary system Key currencies Keynes Plan;

References

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  1. Mundell, Robert, 2005. "The case for a world currency," Journal of Policy Modeling, Elsevier, vol. 27(4), pages 465-475, June.
  2. Michael P. Dooley & David Folkerts-Landau & Peter M. Garber, 2009. "Bretton Woods II Still Defines the International Monetary System," NBER Working Papers 14731, National Bureau of Economic Research, Inc.
  3. McKinnon, Ronald & Schnabl, Gunther, 2006. "Devaluing the dollar: A critical analysis of William Cline's case for a New Plaza Agreement," Journal of Policy Modeling, Elsevier, vol. 28(6), pages 683-694, September.
  4. de Cecco, Marcello, 1979. "Origins of the Post-War Payments System," Cambridge Journal of Economics, Oxford University Press, vol. 3(1), pages 49-61, March.
  5. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2003. "An Essay on the Revived Bretton Woods System," NBER Working Papers 9971, National Bureau of Economic Research, Inc.
  6. Pietro ALESSANDRINI & Michele FRATIANNI, 2008. "Resurrecting Keynes to Revamp the International Monetary System," Working Papers 310, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  7. Paul R. Krugman, 1984. "The International Role of the Dollar: Theory and Prospect," NBER Chapters, in: Exchange Rate Theory and Practice, pages 261-278 National Bureau of Economic Research, Inc.
  8. Gabriele Galati & Philip Wooldridge, 2009. "The euro as a reserve currency: a challenge to the pre-eminence of the US dollar?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(1), pages 1-23.
  9. Trautwein, Hans-Michael, 2005. "Structural aspects of monetary integration: a global perspective," Structural Change and Economic Dynamics, Elsevier, vol. 16(1), pages 1-6, March.
  10. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2003. "Currency Mismatches, Debt Intolerance and Original Sin: Why They Are Not the Same and Why it Matters," NBER Working Papers 10036, National Bureau of Economic Research, Inc.
  11. Charles Goodhart, 1989. "Money, Information and Uncertainty: 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262071223, December.
  12. McKinnon, Ronald I., 1979. "Money in International Exchange: The Convertible Currency System," OUP Catalogue, Oxford University Press, number 9780195024098.
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Cited by:
  1. David Hudson, 2010. "Financing for development and the post Keynesian case for a new global reserve currency," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(6), pages 772-787.
  2. Dariusz Urban, 2011. "Macroeconomic Considerations and Motives of Sovereign Wealth Funds Activity," Contemporary Economics, University of Finance and Management in Warsaw, vol. 5(2), June.

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