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The International Monetary System in Flux: Overview and Prospects

In: Financial Aspects of Recent Trends in the Global Economy

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Author Info

  • Pedro BAÇÃO

    ()
    (University of Coimbra, Faculty of Economics, Portugal)

  • António Portugal DUARTE

    ()
    (University of Coimbra, Faculty of Economics, Portugal)

  • Mariana SIMÕES

    ()
    (University of Coimbra, Faculty of Economics, Portugal)

Abstract

This chapter analyses the architecture of the International Monetary System (IMS) and the role of reserve currencies in it. We begin by describing the evolution of the IMS from the Gold Standard to the Bretton Woods system and the European integration process that led to the creation of the euro. We then discuss the role played by the euro in the IMS as an international reserve currency. Drawing on econometric estimations, we extrapolate the evolution of the shares in international reserves of the euro, the US dollar and the renminbi. In the discussion, we take into account the current sovereign debt crisis and the possibility of a currency war taking place as a result of the reportedly excessive undervaluation of the renminbi and of the expansionist monetary policies undertaken in several advanced economies, namely in the USA. The text ends with a review of proposals for reducing the likelihood of currency wars, which may disrupt the functioning of the current IMS.

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This chapter was published in:

  • Rajmund Mirdala (ed.), 2013. "Financial Aspects of Recent Trends in the Global Economy," Financial Aspects of Recent Trends in the Global Economy, ASERS Publishing, ASERS Publishing, volume 1, number v1, June.
    This item is provided by ASERS Publishing in its series Chapters of Financial Aspects of Recent Trends in the Global Economy book with number v1-10.

    Handle: RePEc:srs:fichap:v1-10

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    Web page: http://www.asers.eu/asers-publishing/collections.html

    Related research

    Keywords: currency war; euro; financial crisis; International Monetary System; exchange rate misalignments.;

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    1. Zsolt Darvas & Jean Pisani-Ferry & Andre Sapir, 2011. "A Comprehensive Approach to the Euro-Area Debt Crisis," IEHAS Discussion Papers, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences 1110, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    2. Bordo, Michael D. & Jonung, Lars, 2000. "A Return to the Convertibility Principle? Monetary And Fiscal Regimes in Historical Perspective," Working Paper Series in Economics and Finance 415, Stockholm School of Economics.
    3. João Sousa Andrade & Adelaide Duarte, 2011. "The Fundamentals of the Portuguese Crisis," GEMF Working Papers 2011-16, GEMF - Faculdade de Economia, Universidade de Coimbra.
    4. António Portugal Duarte & João Sousa Andrade, 2005. "How the gold standard functioned in Portugal: an analysis of some macroeconomic aspects," Method and Hist of Econ Thought, EconWPA 0505002, EconWPA.
    5. William R. Cline, 2010. "Renminbi Undervaluation, China's Surplus, and the US Trade Deficit," Policy Briefs PB10-20, Peterson Institute for International Economics.
    6. Pedro Bação & António Portugal Duarte, 2011. "Accession to the European Union, Interest Rates and Indebtedness: Greece and Portugal," Book Chapters, Institute of Economic Sciences.
    7. Ramkishen S. Rajan & Reza Y. Siregar, 2007. "Models of Equilibrium Real Exchange Rates Revisited: A Selective Review of the Literature," Working Papers id:1198, eSocialSciences.
    8. Pedro Bação & João Maia Domingues & António Portugal Duarte, 2012. "Financial Crisis and Domino Effect," Book Chapters, Institute of Economic Sciences.
    9. Giovannini, Alberto, 1986. "`Rules of the game' during the International Gold Standard: England and Germany," Journal of International Money and Finance, Elsevier, Elsevier, vol. 5(4), pages 467-483, December.
    10. Arvind Subramanian, 2011. "Renminbi Rules: The Conditional Imminence of the Reserve Currency Transition," Working Paper Series, Peterson Institute for International Economics WP11-14, Peterson Institute for International Economics.
    11. John Williamson, 2009. "Why SDRs Could Rival the Dollar," Policy Briefs PB09-20, Peterson Institute for International Economics.
    12. Williamson, John, 1985. "On the System in Bretton Woods," American Economic Review, American Economic Association, American Economic Association, vol. 75(2), pages 74-79, May.
    13. Richard N. Cooper, 2009. "The Future of the Dollar," Policy Briefs PB09-21, Peterson Institute for International Economics.
    14. William R. Cline & John Williamson, 2008. "New Estimates of Fundamental Equilibrium Exchange Rates," Policy Briefs PB08-7, Peterson Institute for International Economics.
    15. McKinnon, Ronald I, 1993. "The Rules of the Game: International Money in Historical Perspective," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 31(1), pages 1-44, March.
    16. Michael D. Bordo & Ronald MacDonald, 2001. "The Inter-War Gold Exchange Standard: Credibility and Monetary Independence," NBER Working Papers 8429, National Bureau of Economic Research, Inc.
    17. William R. Cline & John Williamson, 2011. "The Current Currency Situation," Policy Briefs PB11-18, Peterson Institute for International Economics.
    18. Alan Ahearne & Yung Chul Park & William R. Cline & Jean Pisani-Ferry & Kyung Tae Lee & John Williamson, 2007. "Global imbalances: time for action," Policy Briefs 35, Bruegel.
    19. Morris Goldstein, 2011. "Integrating Reform of Financial Regulation with Reform of the International Monetary System," Working Paper Series, Peterson Institute for International Economics WP11-5, Peterson Institute for International Economics.
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