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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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
15128.
Find related papers by JEL classification: O23 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Driffill, John & Mizon, Grayham E. & Ulph, Alistair, 1990.
"Costs of inflation,"
Handbook of Monetary Economics,
in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 19, pages 1013-1066
Elsevier.
[Downloadable!] (restricted)
Other versions:
Driffill, John & Mizon, Grayham Ernest & Ulph, Alistair Mitchell, 1989.
"Costs of Inflation,"
CEPR Discussion Papers
293, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)