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The Choice of International Monetary Regimes in a Context of Repeated Games

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Author Info
Koichi Hamada
Abstract

A game theoretic and incentive approach is used to explain an international monetary regime. Decisions concerning a fixed exchange rate regime are difficult because they involve cooperation among participants, but decisions concerning defections from a fixed exchange rate regime are relatively easy because they are taken unilaterally. This may explain the difficulties for the completion of Economic and Monetary Union (EMU) in Europe well as the instability recently observed in the quasi-fixed exchange regimes of the Asian countries. EMU is now in full force. The perception of political benefits by national leaders has been the driving force of currency unification in Europe. The cost of a monetary union is the loss of monetary control by each participating nation. If countries cannot contain their desire to deviate from the common monetary expansion, then the currency could potentially be under speculative attack. After January 1, 1999, theoretically each EMU country can no longer deviate from the common norm; but the question remains how to implement this mode of conduct. Even the country in the center, Germany, may find a cost associated with the loss of its leadership role. Copyright Kluwer Academic Publishers 1998

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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 9 (1998)
Issue (Month): 1 (January)
Pages: 417-446
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Handle: RePEc:kap:openec:v:9:y:1998:i:1:p:417-446

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Keywords: international monetary regime; system; game theory; collective action;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  25. Obstfeld, Maurice, 1997. "Destabilizing effects of exchange-rate escape clauses," Journal of International Economics, Elsevier, vol. 43(1-2), pages 61-77, August. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michele Fratianni & Andreas Hauskrecht & Aurelio Maccario, 1998. "Dominant Currencies and the Future of the Euro," Open Economies Review, Springer, vol. 9(1), pages 467-492, January. [Downloadable!] (restricted)
  2. Michele Fratianni & Dominick Salvatore & Paolo Savona, 1998. "Ideas for the Future of the International Monetary System: Conclusions and Remarks," Open Economies Review, Springer, vol. 9(1), pages 689-700, January. [Downloadable!] (restricted)
  3. Forrest Capie, 1998. "Monetary Unions in Historical Perspective: What Future for the Euro in the International Financial System," Open Economies Review, Springer, vol. 9(1), pages 447-466, January. [Downloadable!] (restricted)
  4. Michele Fratianni & Andreas Hauskrecht, 1998. "From the Gold Standard to a Bipolar Monetary System," Open Economies Review, Springer, vol. 9(1), pages 609-636, January. [Downloadable!] (restricted)
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