A Public Choice Perspective
Edited by Giuseppe Eusepi and Friedrich Schneider
Chapter 6: The role of international monetary institutions after the EMU and the Asian crises: some preliminary ideas using constitutional economics*
Friedrich Schneider 1. INTRODUCTION The realization of the euro as the single currency (or European Monetary Union, EMU) promises to be one of the great economic events in modern history. It will certainly be the most important change in the international monetary system since President Nixon took the US dollar oﬀ the gold standard in 1971, which resulted in the world monetary system adopting ﬂexible exchange rates. The introduction of the euro in 2002 will have important economic consequences for the EU countries (see section 2) and will challenge the status of the dollar in the international monetary system (see section 3.1). It will also lead to a change of the monetary power conﬁguration, because the monopoly situation of the dollar will be ended. For this and other reasons (such as the Asian crisis) the introduction of the euro will be the most important development since the dollar replaced the pound sterling as the dominant international currency during World War I. The international monetary institutions (such as the IMF, the World Bank and so on) will thus face new challenges and should rise to them (see section 3.2). In section 4 some theoretical ideas are put forward relating to how a new international monetary institution should operate. With the help of constitutional economics it will be shown how such a monetary institution should be conﬁgured in order to operate much more eﬃciently and react more appropriately to major ﬁnancial economic crises such as the Asian one. In...
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