International Monetary Policy after the Euro
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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.
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Chapter 8: Fundamental reform of the international monetary system: necessity, timing and future directions

Enzo Grilli


Introduced by Enzo Grilli ENZO GRILLI: Our next topic is based on the following question: is it time for fundamental reform of the international monetary system? There are several themes that have emerged from our discussions. To begin with, is reform really necessary? Some would say that systemic instability would indicate that we need reform. Others would say that efficiency requires it. Are there better systems than the current nonsystem? If so, is the EU currency area a path towards a new system? Second, is reform of the international monetary system feasible, given the number of countries? We have talked about Europe, Japan, and the United States, but the number of [other] countries is very large. There are a variety of preferences expressed in the choices of exchange rates. There are a variety of preferences expressed in terms of the policies. There are a variety of situations regarding openness. Therefore, the question of feasibility should not be forgotten. Third, if there is fundamental reform, is a common exchange rate regime desirable? If not, are there principles for going to a better system of exchange rate regimes than the sort of free-for-all system that we have grown accustomed to? The choice of exchange rate [regime] is important not only for the countries that make them, but also important from the standpoint of the general stability of the system. Therefore, some judgment on those choices is desirable. Finally, is there a role for the IMF [International Monetary Fund] in either keeping...

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