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International Monies, Special Drawing Rights, and Supernational Money

Author

Listed:
  • Pietro Alessandrini

    (Universita Politecnica delle Marche)

  • Michele Fratianni

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Abstract

The current international monetary system (IMS) is fragile because the dollar standard is rapidly deteriorating. The dual role the dollar as the dominant international money and national money cannot be easily reconciled because the US monetary authorities face a conflict between pursuing domestic objectives of employment and inflation and maintaining the international public good of a stable money. To strengthen the IMS, China has advocated the revitalization of the Special Drawing Rights (SDRs). But SDRs are neither money nor a claim on any international institution; are issued exogenously without any consideration to countries’ financing needs; and can activate international monies only though bilateral transactions. The historical record of SDRs as international reserves is altogether unimpressive. We propose instead the creation of a supernational bank money (SBM) within the institutional setting of a clearing union. This union would be a full-fledged agreement by participating central banks on specific rules of the game, such as size and duration of overdrafts, designation of countries that would have to bear the burden of external adjustment, and coordination of monetary policies objectives and at expense of the maintenance of the international public good. We also discuss structural changes that would make SDRs converge to SBMs.

Suggested Citation

  • Pietro Alessandrini & Michele Fratianni, 2009. "International Monies, Special Drawing Rights, and Supernational Money," Working Papers 2009-03, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  • Handle: RePEc:iuk:wpaper:2009-03
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    References listed on IDEAS

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    Cited by:

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    2. Shirai, Sayuri, 2009. "世界経済危機とグローバル・マネーの変動 ―国際経済秩序へのインプリケーションー [Global Economic Crisis and Movements of Cross-Border Capital Flows ―Implication to the Global Economic Order―]," MPRA Paper 18619, University Library of Munich, Germany.
    3. Daniel Gros, 2013. "Becoming Slimmer: Why Europe Needs to Cut Debt and Reduce Leverage," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 14(03), pages 17-24, October.
    4. Gros, Daniel & Alcidi, Cinzia, 2014. "The Global Economy in 2030: Trends and Strategies for Europe," CEPS Papers 9142, Centre for European Policy Studies.
    5. Jacopo Carmassi & Daniel Gros & Stefano Micossi, 2009. "The Global Financial Crisis: Causes and Cures," Journal of Common Market Studies, Wiley Blackwell, vol. 47, pages 977-996, November.
    6. Daniel Gros, 2013. "Becoming Slimmer: Why Europe Needs to Cut Debt and Reduce Leverage," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 14(3), pages 17-24, October.

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    More about this item

    Keywords

    international money; international monetary system; Special Drawing Right; supernational bank money;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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