Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/27468 
Year of Publication: 
2008
Series/Report no.: 
Economics Discussion Papers No. 2008-32
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
Is there a valid argument for international cooperation, and some form of international governance structure, in the international monetary realm? On the purely economic front, the argument is not strong. Yet a broader political economy approach concludes that national currency policy can in fact impose non-pecuniary externalities on partner nations. This is especially the case with major policy-driven misalignments, which cannot easily be countered by other governments. For example, one country's substantially depreciated currency can provoke powerful protectionist pressures in its trading partners, so that exchange rate policy spills over into trade policy in potentially damaging ways. Inasmuch as one government's policies create these sorts of costs for other countries, and for the world economy as a whole, there is a case for global governance. This might include some institutionalized mechanism to monitor and publicize substantial currency misalignments. While there appears to be little global political attention to such a mechanism now, there have been initiatives along these lines at the regional level, and there are some early stirrings of interest more generally.
Subjects: 
Exchange rates
macroeconomic policy coordination
JEL: 
H87
F55
F42
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Working Paper

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