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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.

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  • 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.
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    8. Lilia Costabile, 2010. "The International Circuit of Key Currencies and the Global Crisis: Is there Scope for Reform?," Working Papers wp220, Political Economy Research Institute, University of Massachusetts at Amherst.
    9. Jorg Bibow, 2010. "Bretton Woods 2 Is Dead, Long Live Bretton Woods 3?," Economics Working Paper Archive wp_597, Levy Economics Institute.
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    Cited by:

    1. 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.
    2. 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.
    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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