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A global currency for a global economy

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  • BASIL J. MOORE

Abstract

When using national currencies in international trade, both flexible and fixed exchange rate systems pose a number of problems. The most important is a large deflationary bias on the global economy, as deficit countries are forced to try to attain a positive current account balance to protect their exchange rate. The author advances a Post Keynesian policy proposal for a common global currency, where exchange rates vanish and countries no longer have an external balance constraint. In order to move toward a common world currency, two approaches are considered: a top-down approach, consisting of a global central bank (or a small number of competitive regional central banks), which is politically unfeasible, and a bottom-up approach, consisting of blocs of countries that chose to dollarize or euroize. The paper proposes a dollarization/euroization plan for the global economy. This would enable economies to pursue expansionary domestic policies since they would no longer face an external balance constraint.

Suggested Citation

  • Basil J. Moore, 2004. "A global currency for a global economy," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 26(4), pages 631-653.
  • Handle: RePEc:mes:postke:v:26:y:2004:i:4:p:631-653
    DOI: 10.1080/01603477.2004.11051415
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    File URL: http://hdl.handle.net/10.1080/01603477.2004.11051415
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    Cited by:

    1. C. Sardoni & L. Randall Wray, 2007. "Fixed and Flexible Exchange Rates and Currency Sovereignty," Economics Working Paper Archive wp_489, Levy Economics Institute.

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