Le Système monétaire international et l'Union monétaire européenne

The international monetary system and the European Monetary Union Jean-Paul Fitoussi et Marc Flandreau The 50th anniversary of the creation of the Bretton Woods system offers the opportunity to confront the recent evolutions of the European Monetary System to previous experiments. In the past, three main types of monetary arrangements have prevailed. One type is what we call « decentralized and unconstrained systems », where the sovereignty of each country over its monetary policy is complete (e.g. floating exchange rates arrangements). Another type is what we call « fully centralized systems », where monetary power is transferred to some central authority (e.g. Federal Reserve System). Finally, a hybrid case is represented by what we call « decentralized yet constrained systems » (e.g. the Bretton Woods system, or the EMS) where nations are (i) sovereign over their domestic policies, but (ii) constrained by a set of common rules (for instance, they have to take into account the policies of other nations). This paper is an attempt to provide a cost-benefit analysis of these various options. Two main conclusions emerge. First, the apparent autonomy obtained under the « decentralized and unconstrained system » is probably merely an illusion because the inherent difficulties associated with a general float of the various currencies wipe out most of the advantages associated with effective sovereignty. Second, we argue that decentralized yet unconstrained regimes (such as EMS) usually induce a deflationary bias which renders these arrangements both costly and unsustainable. This finally suggests that the fundamental dilemma of international arrangements is that there may not be any stable regime without the construction of a supra-national institution.