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Global Governance of Global Monetary Relations: Rationale and Feasibility

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  • Frieden, Jeffry A.

Abstract

Is there a valid argument for international cooperation, and some form of international governance structure, in the international monetary realm? On the purely economic front, the argument is not strong. Yet a broader political economy approach concludes that national currency policy can in fact impose non-pecuniary externalities on partner nations. This is especially the case with major policy-driven misalignments, which cannot easily be countered by other governments. For example, one country's substantially depreciated currency can provoke powerful protectionist pressures in its trading partners, so that exchange rate policy spills over into trade policy in potentially damaging ways. Inasmuch as one government's policies create these sorts of costs for other countries, and for the world economy as a whole, there is a case for global governance. This might include some institutionalized mechanism to monitor and publicize substantial currency misalignments. While there appears to be little global political attention to such a mechanism now, there have been initiatives along these lines at the regional level, and there are some early stirrings of interest more generally.

Suggested Citation

  • Frieden, Jeffry A., 2008. "Global Governance of Global Monetary Relations: Rationale and Feasibility," Economics Discussion Papers 2008-32, Kiel Institute for the World Economy (IfW Kiel).
  • Handle: RePEc:zbw:ifwedp:7408
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    References listed on IDEAS

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    Cited by:

    1. Philip R Lane & Livio Stracca, 2018. "Can appreciation be expansionary? Evidence from the euro area," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 33(94), pages 225-264.

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    More about this item

    Keywords

    Exchange rates; macroeconomic policy coordination;

    JEL classification:

    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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