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An institutional analysis of some monetary issues in developing economies

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  • Strachman, Eduardo
  • Vasconcelos, Marcos Roberto

Abstract

The paper shows the difficulties that the increasing international mobility of capitals set to the execution of monetary policy in the development countries. In modern capitalist economies, more than ever, money should be viewed as an institution. Therefore, it is first necessary to understand what are institutions (being money one of them) in order to comprehend the institutional and theoretical prerequisites to monetary policies and monetary stability. In this discussion, we emphasize the challenges that the monetary and financial opening up of many national markets impose for the execution of economic policies. In this sense, we also examine some of the specific institutional prerequisites to monetary stability in the development countries, because of facts as the inconvertibility of their currencies, and the frequent inconsistency of their fiscal, monetary and exchange policies, etc. We try to demonstrate that those institutional difficulties are responsible for the growing appeal of proposals to a complete abandonment of some national currencies, or for the adoption of currency boards in which the policymakers renounce to their power to decide about the liquidity level of their economies, in spite of the formal existence of their national currencies. Finally, we present some suggestions to the solution of the referred problems.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15128.

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Date of creation: 2001
Date of revision: May 2009
Handle: RePEc:pra:mprapa:15128

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Keywords: Institutions; Money; Developing Countries;

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  1. Maurice Obstfeld., 1998. "The Global Capital Market: Benefactor or Menace?," Center for International and Development Economics Research (CIDER) Working Papers C98-098, University of California at Berkeley.
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Cited by:
  1. Strachman, Eduardo, 2009. "Implementing inflation targeting in Brazil: an institutional analysis," MPRA Paper 15131, University Library of Munich, Germany, revised May 2009.

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