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The International Monetary System in Flux: Overview and Prospects

  • 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)

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.

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Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2013-07.

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Length: 29 pages
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:gmf:wpaper:2013-07.
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  1. João Sousa Andrade & Adelaide Duarte, 2011. "The Fundamentals of the Portuguese Crisis," GEMF Working Papers 2011-16, GEMF - Faculdade de Economia, Universidade de Coimbra.
  2. Arvind Subramanian, 2011. "Renminbi Rules: The Conditional Imminence of the Reserve Currency Transition," Working Paper Series WP11-14, Peterson Institute for International Economics.
  3. Zsolt Darvas & Jean Pisani-Ferry & André Sapir, 2011. "A Comprehensive Approach to the Euro-Area Debt Crisis," Working Papers 1101, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
  4. Richard N. Cooper, 2009. "The Future of the Dollar," Policy Briefs PB09-21, Peterson Institute for International Economics.
  5. Giovannini, Alberto, 1986. "`Rules of the game' during the International Gold Standard: England and Germany," Journal of International Money and Finance, Elsevier, vol. 5(4), pages 467-483, December.
  6. Alan Ahearne & William R. Cline & Kyung Tae Lee & Yung Chul Park & Jean Pisani-Ferry & John Williamson, 2007. "Global Imbalances: Time for Action," Policy Briefs PB07-4, Peterson Institute for International Economics.
  7. Pedro Bação & António Portugal Duarte, 2011. "Accession to the European Union, Interest Rates and Indebtedness: Greece and Portugal," Book Chapters, Institute of Economic Sciences.
  8. Morris Goldstein, 2011. "Integrating Reform of Financial Regulation with Reform of the International Monetary System," Working Paper Series WP11-5, Peterson Institute for International Economics.
  9. McKinnon, Ronald I, 1993. "The Rules of the Game: International Money in Historical Perspective," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 1-44, March.
  10. William R. Cline, 2010. "Renminbi Undervaluation, China's Surplus, and the US Trade Deficit," Policy Briefs PB10-20, Peterson Institute for International Economics.
  11. Ant�nio Portugal Duarte & Jo�o 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.
  12. John Williamson, 2009. "Why SDRs Could Rival the Dollar," Policy Briefs PB09-20, Peterson Institute for International Economics.
  13. Pedro Bação & João Maia Domingues & António Portugal Duarte, 2012. "Financial Crisis and Domino Effect," GEMF Working Papers 2012-10, GEMF - Faculdade de Economia, Universidade de Coimbra.
  14. Williamson, John, 1985. "On the System in Bretton Woods," American Economic Review, American Economic Association, vol. 75(2), pages 74-79, May.
  15. Bordo, Michael D. & Jonung, Lars, 2000. "A Return to the Convertibility Principle? Monetary And Fiscal Regimes in Historical Perspective," SSE/EFI Working Paper Series in Economics and Finance 415, Stockholm School of Economics.
  16. William R. Cline & John Williamson, 2008. "New Estimates of Fundamental Equilibrium Exchange Rates," Policy Briefs PB08-7, Peterson Institute for International Economics.
  17. William R. Cline & John Williamson, 2011. "The Current Currency Situation," Policy Briefs PB11-18, Peterson Institute for International Economics.
  18. Bordo, Michael D. & MacDonald, Ronald, 2003. "The inter-war gold exchange standard: credibility and monetary independence," Journal of International Money and Finance, Elsevier, vol. 22(1), pages 1-32, February.
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