The geopolitics of currencies and the issue of monetary sovereignty
Purpose – This paper seeks to focus on the challenge posed by financial globalization before the traditional Westphalian model of monetary sovereignty, claiming that financial globalization of the world's markets leads to new forms of geopolitical rivalry among contemporary governments. Design/methodology/approach – The paper sets the analytical framework for the study of a tripartite foundation of monetary sovereignty in money manager capitalism, consisting of currency associated with the instruments of its manipulation, which are the two largest independent macroeconomic players: the central bank and the state. This raises the issues of dual sovereignty in economy and the ways in which these entities use their sovereign powers on local and global levels. Findings – Current growing interdependence of financial networks increases the number of choices in monetary issues and forces governments to make ever faster adjustments to the machinery of complex monetary instruments which not only facilitate transactions among very different and distant economies, but also obscure the transparency of decision making. The need to ensure, through the central bank's legislation, an independent status of central bankers with respect to politicians, implies that their work be effectively monitored by the public and the respective parliament. Practical implications – The independence of central banks, which comprises goal independence, instrument independence and personal independence of the decision-making body of a central bank, increases the accountability of central bankers and raises the issue of sanctions for their misbehavior. Originality/value – Financial globalization has definitely raised the issue of redistribution of the authority of governments and non-state agents. A clear hierarchy between currencies at the global level has dual consequences: first, it amplifies the unequal relationship between the leaders and the followers in global monetary circulation; second, global market forces ignore political borders and present a serious challenge for the monetary sovereignty of contemporary governments. Equally, the question of re-formulation of the concept of a sovereign state is raised.
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Volume (Year): 6 (2010)
Issue (Month): 2 (July)
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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.:
- Pierre L. Siklos, 1994.
"Varieties of Monetary Reforms,"
IMF Working Papers
94/57, International Monetary Fund.
- Alex Cukierman, 1986. "Central bank behavior and credibility: some recent theoretical developments," Review, Federal Reserve Bank of St. Louis, issue May, pages 5-17.
- Fischer, Stanley, 1995. "Central-Bank Independence Revisited," American Economic Review, American Economic Association, vol. 85(2), pages 201-06, May.
- Strange, Susan, 1987. "The Persistent myth of lost hegemony," International Organization, Cambridge University Press, vol. 41(04), pages 551-574, September.
- Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-62, May.
- William D. Nordhaus, 1975. "The Political Business Cycle," Review of Economic Studies, Oxford University Press, vol. 42(2), pages 169-190.
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