International Monetary Policy after the Euro

International Monetary Policy after the Euro

Edited by Robert A. Mundell, Paul J. Zak and Derek Schaeffer

This fascinating book, a dialogue by leading economists, offers an extensive review of the impact of the introduction of the euro on the international monetary system.

Chapter 1: Introduction

Robert A. Mundell and Paul J. Zak

Subjects: economics and finance, money and banking

Extract

By Robert A. Mundell and Paul J. Zak For more than three decades, the Bologna–Claremont Monetary Conferences have generated lively and engaging debates on international monetary policy. Academics, bankers and officials from all over the world have discussed the most important issues at the forefront of international monetary policy and debated prospects for reform. This volume reports the proceedings of the Bologna–Claremont conference held in March 23–25, 2000 at the Johns Hopkins Center in Bologna, Italy. The first conference of the series was held at the Bologna Center in 1967. Its inspiration stemmed from the problems arising from the precarious state of the gold-anchored fixed exchange rate international monetary system that had served the world economy in the post-war decades. Major exchange rates were fixed to the US dollar, which in turn was convertible into gold. But price levels in all the major countries had soared during and after World War II, the Korean War and the Vietnam War, while the dollar price of gold had been maintained at $35 an ounce, originally set at this rate in 1934. As gold became scarce, countries turned to using dollar balances in lieu of gold for international payments and reserves. But the buildup of dollar balances created new problems as its convertibility into gold became increasingly questionable. Shifts in central bank portfolios led to a drain on the US gold stock and speculation, putting the international monetary system in jeopardy. The international monetary system seemed to be stuck...