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One World Money, Then and Now

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  • Michael Bordo
  • Harold James

Abstract

The case for monetary simplification and unification has been made since the middle of the nineteenth century. It rests on four principal arguments ;reduced transaction costs; establishing credibility; preventing bad policy in other states; political integration via money. In this paper we argue that the case for monetary integration is becoming increasingly less persuasive. In making our case we posit a different concept of money to the one that underlay the nineteenth century discussions which we term "Newtonian" since it was based on the assumption of a single reference external to the state reflected in the definition of value in terms of precious metals. In the twentieth century, views of money have shifted to a more " Einsteinian" or relativistic conception. Measures of value that move relative to each other are helpful in terms of dealing with large shifts in relative prices that affect different countries very differently. In the current age of globalization, "Einsteinian" money is capable of accommodating shifts that were politically destructive in the " Newtonian" world.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12189.

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Date of creation: May 2006
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Handle: RePEc:nbr:nberwo:12189

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  1. Tamim Bayoumi & Barry Eichengreen, 1992. "Shocking Aspects of European Monetary Unification," NBER Working Papers 3949, National Bureau of Economic Research, Inc.
  2. Michael A. Clemens & Jeffrey G. Williamson, 2000. "Where did British Foreign Capital Go? Fundamentals, Failures and the Lucas Paradox: 1870-1913," NBER Working Papers 8028, National Bureau of Economic Research, Inc.
  3. Mundell, Robert, 2005. "The case for a world currency," Journal of Policy Modeling, Elsevier, vol. 27(4), pages 465-475, June.
  4. Goodhart, Charles A. E., 1998. "The two concepts of money: implications for the analysis of optimal currency areas," European Journal of Political Economy, Elsevier, vol. 14(3), pages 407-432, August.
  5. Eichengreen, B., 1992. "Should the Maastricht Treaty be Saved?," Princeton Studies in International Economics 74, International Economics Section, Departement of Economics Princeton University,.
  6. Michael D. Bordo & Marc Flandreau, 2001. "Core, Periphery, Exchange Rate Regimes, and Globalization," NBER Working Papers 8584, National Bureau of Economic Research, Inc.
  7. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear Of Floating," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 379-408, May.
  8. Michael D. Bordo & Lars Jonung, 1999. "The Future of EMU: What Does the History of Monetary Unions Tell Us?," NBER Working Papers 7365, National Bureau of Economic Research, Inc.
  9. Frankel, Jeffrey A & Rose, Andrew K, 1996. "The Endogeneity of the Optimum Currency Area Criteria," CEPR Discussion Papers 1473, C.E.P.R. Discussion Papers.
  10. 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.
  11. Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
  12. Eichengreen, B, 1996. "A More Perfect Union? The Logic of Economic Integration," Princeton Essays in International Economics 198, International Economics Section, Departement of Economics Princeton University,.
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Cited by:
  1. John Williamson, 2006. "A worldwide system of reference rates," International Economics and Economic Policy, Springer, vol. 3(3), pages 341-352, December.
  2. Bordo, Michael D. & Cooper, Richard N., 2006. "Proposal for a Common Currency among Rich Democracies," Working Papers 127, Oesterreichische Nationalbank (Austrian Central Bank).
  3. Alexandros E. Milionis, 2006. "An Alternative Definition of Market Efficiency and some Comments on its Empirical Testing," Working Papers 50, Bank of Greece.
  4. Paul Welfens, 2006. "Comments on R. Cooper, M. Bordo and H. James: A Schumpetrian view on monetary integration options and historical dynamics," International Economics and Economic Policy, Springer, vol. 3(3), pages 415-419, December.
  5. Sergio Schmukler, 2006. "Comments on R. Cooper, M. Bordo and H. James: Exchange rate arrangements and disarrangements: prospects for a world currency," International Economics and Economic Policy, Springer, vol. 3(3), pages 409-414, December.

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