A global currency for a global economy
AbstractWhen using national currencies in international trade, both flexible and fixed exchange rate systems pose a number of problems. The most important is a large deflationary bias on the global economy, as deficit countries are forced to try to attain a positive current account balance to protect their exchange rate. The author advances a Post Keynesian policy proposal for a common global currency, where exchange rates vanish and countries no longer have an external balance constraint. In order to move toward a common world currency, two approaches are considered: a top-down approach, consisting of a global central bank (or a small number of competitive regional central banks), which is politically unfeasible, and a bottom-up approach, consisting of blocs of countries that chose to dollarize or euroize. The paper proposes a dollarization/euroization plan for the global economy. This would enable economies to pursue expansionary domestic policies since they would no longer face an external balance constraint.
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Bibliographic InfoArticle provided by M.E. Sharpe, Inc. in its journal Journal of Post Keynesian Economics.
Volume (Year): 26 (2004)
Issue (Month): 4 (October)
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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=109348
dollarization; euroization; external balance constraint; money;
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- C. Sardoni & L. Randall Wray, 2007. "Fixed and Flexible Exchange Rates and Currency Sovereignty," Economics Working Paper Archive wp_489, Levy Economics Institute, The.
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