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Keynes and the International Clearing Union: A Possible Model for Eurozone Reform?

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  • Philip B. Whyman

Abstract

Economic and monetary union in Europe, as currently constituted, has a number of structural weaknesses. Large, persistent international payments imbalances necessitate deficit nations to deflate their economies or squeeze social wages in order to restore competitiveness. Surplus nations accrue reserves, with little pressure to maintain related contribution to spending power in the real economy. The asymmetric treatment of credit and debit nations reduces aggregate demand in the eurozone. This article examines a solution, first proposed by John Maynard Keynes, whereby symmetrical treatment of balance of payments transactions may promote economic growth and higher levels of employment. It outlines the key features of the system and highlights the relevance of the solution to the issues faced by the eurozone.

Suggested Citation

  • Philip B. Whyman, 2015. "Keynes and the International Clearing Union: A Possible Model for Eurozone Reform?," Journal of Common Market Studies, Wiley Blackwell, vol. 53(2), pages 399-415, March.
    • Handle: RePEc:bla:jcmkts:v:53:y:2015:i:2:p:399-415
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    File URL: http://hdl.handle.net/10.1111/jcms.12180
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    References listed on IDEAS

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    1. Philip Arestis, 1999. "The Independent European Central Bank: Keynesian Alternatives," Macroeconomics 9908004, University Library of Munich, Germany.
    2. James Tobin, 1978. "A Proposal for International Monetary Reform," Eastern Economic Journal, Eastern Economic Association, vol. 4(3-4), pages 153-159, Jul/Oct.
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    7. Jörg Bibow, 2007. "Global Imbalances, Bretton Woods II, and Euroland’s Role in All This," Palgrave Macmillan Books, in: Jörg Bibow & Andrea Terzi (ed.), Euroland and the World Economy, chapter 1, pages 15-42, Palgrave Macmillan.
    8. David R. Richardson, 1985. "On Proposals for a Clearing Union," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 8(1), pages 14-27, September.
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    11. Piffaretti, Nadia F., 2009. "Reshaping the international monetary architecture : lessons from Keynes'plan," Policy Research Working Paper Series 5034, The World Bank.
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    Cited by:

    1. Chmielewski Tomasz & Sławiński Andrzej, 2019. "Lessons from TARGET2 imbalances: The case for the ECB being a lender of last resort," Economics and Business Review, Sciendo, vol. 5(2), pages 48-63, June.
    2. Gaysset, Isabelle & Lagoarde-Segot, Thomas & Neaime, Simon, 2019. "Twin deficits and fiscal spillovers in the EMU's periphery. A Keynesian perspective," Economic Modelling, Elsevier, vol. 76(C), pages 101-116.
    3. Marco Meyer, 2021. "Dealing fairly with trade imbalances in monetary unions," Politics, Philosophy & Economics, , vol. 20(1), pages 45-66, February.

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