The Instability and Inequities of the Global Reserve System
AbstractThis paper argues that the current global reserve system is inherently unstable due to the use of a national currency as the major international reserve currency, and the high demand for “self-insurance” by developing countries. The latter is due to the mix of highly pro-cyclical capital flows and the limited room to maneuver that developing countries have to manage counter-cyclical macroeconomic policies. Both features imply that the system is also inequitable. An important insight of the paper is that such inequities feed into the instability of current arrangements. Any meaningful reform of the system must therefore address these two interlinked features.
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Bibliographic InfoPaper provided by United Nations, Department of Economics and Social Affairs in its series Working Papers with number 59.
Length: 20 pages
Date of creation: Nov 2007
Date of revision:
Global reserve currency; seigniorage powers; financial volatility; pro-cyclical macroeconomic policies; self-insurance; inequities of international economic order;
Find related papers by JEL classification:
- F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
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