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Systemic equilibrium in a Bretton Woods II-type international monetary system: the special roles of reserve issuers and reserve accumulators

  • Kenneth Austin
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    This article develops a model, based on balance-of-payment identities, of the new international monetary system (Bretton Woods II or BWII). It shows that if some countries engineer current account surpluses by exchange-rate manipulation and foreign-reserve accumulation, the burden of the corresponding current account deficits falls first on the reserve-issuing countries, unless those savings inflows are diverted elsewhere. The imbalances of the BWII period result from official, policy-driven reserve flows, rather than market-determined, private savings flows. The struggle to divert these unwanted financing flows is at the root of the "currency wars" within the system.

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    File URL: http://mesharpe.metapress.com/link.asp?target=contribution&id=FM710QJK4942L277
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    Article provided by M.E. Sharpe, Inc. in its journal Journal of Post Keynesian Economics.

    Volume (Year): 36 (2014)
    Issue (Month): 4 (July)
    Pages: 607-634

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    Handle: RePEc:mes:postke:v:36:y:2014:i:4:p:607-634
    Contact details of provider: Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=109348

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