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International Monies, Special Drawing Rights, and Supernational Money

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  • Pietro Alessandrini

    (Universita Politecnica delle Marche)

  • Michele Fratianni

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Abstract

The current international monetary system (IMS) is fragile because the dollar standard is rapidly deteriorating. The dual role the dollar as the dominant international money and national money cannot be easily reconciled because the US monetary authorities face a conflict between pursuing domestic objectives of employment and inflation and maintaining the international public good of a stable money. To strengthen the IMS, China has advocated the revitalization of the Special Drawing Rights (SDRs). But SDRs are neither money nor a claim on any international institution; are issued exogenously without any consideration to countries’ financing needs; and can activate international monies only though bilateral transactions. The historical record of SDRs as international reserves is altogether unimpressive. We propose instead the creation of a supernational bank money (SBM) within the institutional setting of a clearing union. This union would be a full-fledged agreement by participating central banks on specific rules of the game, such as size and duration of overdrafts, designation of countries that would have to bear the burden of external adjustment, and coordination of monetary policies objectives and at expense of the maintenance of the international public good. We also discuss structural changes that would make SDRs converge to SBMs.

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Bibliographic Info

Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2009-03.

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Date of creation: Jul 2009
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Handle: RePEc:iuk:wpaper:2009-03

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Keywords: international money; international monetary system; Special Drawing Right; supernational bank money;

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References

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  1. Barry Eichengreen, 2005. "Sterling's Past, Dollar's Future: Historical Perspectives on Reserve Currency Competition," NBER Working Papers 11336, National Bureau of Economic Research, Inc.
  2. José Manuel Campa & Linda S. Goldberg, 2005. "Exchange Rate Pass-Through into Import Prices," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 679-690, November.
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  4. Ben S. Bernanke, 2007. "Global imbalances: recent developments and prospects," Speech 317, Board of Governors of the Federal Reserve System (U.S.).
  5. Michele Fratianni, 2008. "Financial Crises, Safety Nets and Regulation," Mo.Fi.R. Working Papers 5, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  6. Gourinchas, Pierre-Olivier & Rey, Hélène, 2005. "From World Banker to World Venture Capitalist: US External Adjustment and the Exorbitant Privilege," CEPREMAP Working Papers (Docweb) 0606, CEPREMAP.
  7. Pietro Alessandrini & Michele Fratianni, 2009. "Resurrecting Keynes to Stabilize the International Monetary System," Open Economies Review, Springer, vol. 20(3), pages 339-358, July.
  8. Flandreau, Marc & Le Cacheux, Jacques & Zumer, Frédéric, 1998. "Stability Without a Pact? Lessons from the European Gold Standard 1880-1914," CEPR Discussion Papers 1872, C.E.P.R. Discussion Papers.
  9. 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.
  10. Lopez, Robert Sabatino, 1951. "The Dollar of the Middle Ages," The Journal of Economic History, Cambridge University Press, vol. 11(03), pages 209-234, June.
  11. Fratianni, Michele, 1974. "The Problem of Coexistence of SDRs and a Reserve Currency: Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(1), pages 115-18, February.
  12. Elias Papaioannou & Richard Portes, 2008. "Costs and benefits of running an international currency," European Economy - Economic Papers 348, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  13. repec:rie:review:v:13:y:2008:i:2:n:1 is not listed on IDEAS
  14. Michael Dooley & David Folkerts-Landau & Peter Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
  15. Kindleberger,, 2008. "Financial Crises," Cambridge Books, Cambridge University Press, number 9780521068710, October.
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Cited by:
  1. Daniel Gros, 2013. "Becoming Slimmer: Why Europe Needs to Cut Debt and Reduce Leverage," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 14(3), pages 17-24, October.
  2. Shirai, Sayuri, 2009. "世界経済危機とグローバル・マネーの変動 ―国際経済秩序へのインプリケーションー
    [Global Economic Crisis and Movements of Cross-Border Capital Flows ―Implicatio
    ," MPRA Paper 18619, University Library of Munich, Germany.

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