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The International Monetary System in Flux: Overview and Prospects

Author

Listed:
  • Pedro Bação

    () (Faculty of Economics, University of Coimbra and GEMF, Portugal)

  • António Portugal Durate

    () (Faculty of Economics, University of Coimbra and GEMF, Portugal)

  • Mariana Simões

    (Faculty of Economics, University of Coimbra, Portugal)

Abstract

This paper analyses the architecture of the International Monetary System (IMS) and the role of reserve currencies in it. We begin by describing the evolution of the IMS from the Gold Standard to the Bretton Woods system and the European integration process that led to the creation of the euro. We then discuss the role played by the euro in the IMS as an international reserve currency. Drawing on econometric estimations, we extrapolate the evolution of the shares in international reserves of the euro, the US dollar and the renminbi. In the discussion, we take into account the current sovereign debt crisis and the possibility of a currency war taking place as a result of the reportedly excessive undervaluation of the renminbi and of the expansionist monetary policies undertaken in several advanced economies, namely in the USA. The text ends with a review of proposals for reducing the likelihood of currency wars, which may disrupt the functioning of the current IMS.

Suggested Citation

  • Pedro Bação & António Portugal Durate & Mariana Simões, 2013. "The International Monetary System in Flux: Overview and Prospects," GEMF Working Papers 2013-07, GEMF, Faculty of Economics, University of Coimbra.
  • Handle: RePEc:gmf:wpaper:2013-07.
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    File URL: http://gemf.fe.uc.pt/workingpapers/pdf/2013/gemf_2013-07.pdf
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    References listed on IDEAS

    as
    1. António Portugal Duarte & João Sousa Andrade, 2012. "How the Gold Standard functioned in Portugal: an analysis of some macroeconomic aspects," Applied Economics, Taylor & Francis Journals, vol. 44(5), pages 617-629, February.
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    3. André Sapir, 2011. "A Comprehensive Approach to the Euro-Area Debt Crisis," ULB Institutional Repository 2013/174297, ULB -- Universite Libre de Bruxelles.
    4. Arvind Subramanian, 2011. "Renminbi Rules: The Conditional Imminence of the Reserve Currency Transition," Working Paper Series WP11-14, Peterson Institute for International Economics.
    5. Pedro Bação & João Maia Domingues & António Portugal Duarte, 2012. "Financial Crisis and Domino Effect," Book Chapters, Institute of Economic Sciences.
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    12. William R. Cline, 2010. "Renminbi Undervaluation, China's Surplus, and the US Trade Deficit," Policy Briefs PB10-20, Peterson Institute for International Economics.
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    More about this item

    Keywords

    currency war; euro; financial crisis; International Monetary System; exchange rate misalignments.;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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