Abstract
Tiny changes in the American monetary policy can have dramatic effects on the rest of the world because of dollar’s double role of national and international currency. This is the Triffin dilemma. The paper shows how it works through three examples: price of commodities, dollarization, and the international financial position of the US. And it makes a proposal to solve these issues, creating a more stable monetary system. In particular, it suggests the creation of an international monetary system of block regional currencies. Globalization and regionalization should be the two forces leading towards the new monetary system. The US and Europe should consider to adopt the same currency through a system of fixed exchange rates (global currency). This currency should perform its duty of anchor of the system, reducing global imbalances and gyrations in price of commodities. Developing countries, by contrast, should create regional monetary unions (regional currencies), preserving the real exchange rate as shock absorber, but gaining in terms of time consistency and credibility.
References
Alesina, A. and R. Barro (2001). Dollarization. American Economic Review, 91 (2): 381–385.Search in Google Scholar
Alesina, A. and R. Barro (2002). Currency Unions. Quarterly Journal of Economics, 117 (2): 409–436.Search in Google Scholar
Alesina, A., R. Barro, and S. Tenreyro (2003). Optimal Currency Areas. National Bureau of Economic Research. NBER Macroeconomics Annual 2002, 17: 301–356.Search in Google Scholar
Bayoumi, T, and B. Eichengreen (1992). Shocking Aspects of European Monetary Unification. National Bureau of Economic Research, NBER Working Paper, No 3949.10.3386/w3949Search in Google Scholar
Bayoumi, T. and B. Eichengreen (1994). One Money or Many? Analysing the Prospects of Monetary Unification in Various Parts of the World. Princeton Studies in International Finance, No. 76, September, Princeton.Search in Google Scholar
Bayoumi, T. and B. Eichengreen (1996). Is Asia an Optimum Currency Area? Can it Become One? Regional, Global and Historical Perspectives on Asian Monetary Relations. Center for International and Development Economics Research (CIDER) Working Papers C96-081. University of California.Search in Google Scholar
Bini Smaghi, L. (2008). The Financial Crisis and Global Imbalances: Two Sides of the Same Coin. Speech at Asia-Europe Economic Forum, Beijing, 9 DecemberSearch in Google Scholar
Blanchard, O. and G.M. Milesi-Ferretti (2009). Global Imbalances: In Midstream? International Monetary Fund. IMF Staff Position Note 09/29, 22 December.Search in Google Scholar
Calvo, G. (1999). Testimony on Full Dollarization. University of Maryland, College Park.Search in Google Scholar
Chang R. and A. Velasco (2001). A Model of Fincancial Crises in Emerging Markets. Quarterly Journal of Economics, 116 (2): 489–517.Search in Google Scholar
Chinn, M. and J. Frankel (2005). Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency? National Bureau of Economic Research, NBER Working Paper, No. 11510.Search in Google Scholar
Cooper, R. (2004). Proposal for a Common Currency among Rich Democracies. Harvard Working Paper.Search in Google Scholar
Davidson, P. (1992). International Money and the Real World. Macmillan.10.1057/9780230378094Search in Google Scholar
Frankel, J., and A. Rose (1998). The Endogeneity of the Optimum Currency Area Criteria. The Economic Journal, 108 (449): 1009–1025.Search in Google Scholar
Fred (Federal Reserve Economic Data) (various years). Federal Reserve Bank of St. Louis: TWEX, Dollar’s Trade Weighted Exchange Index; OILPRICE, Spot Oil Price, accessed August 2010. http://research.stlouisfed.org/fred2/Search in Google Scholar
Krugman, P. (1979). A Model of Balance-of-Payments Crises. Journal of Money, Credit, and Banking, 11: 311–325.Search in Google Scholar
Krugman, P. (1993). Lessons of Massachusetts for EMU. In F. Giavazzi and F. Torres (eds). The Transition to Economic and Monetary Union in Europe. New York: Cambridge University Press.Search in Google Scholar
Krugman, P. (1998). What Happened to Asia? Paper presented at a Conference in Japan. http://web.mit.edu/krugman/www/DISINTER.htmlSearch in Google Scholar
Mateos y Lago, I., R. Duttagupta, and R. Goyal (2009). The Debate on the International Monetary System. International Monetary Fund. IMF Staff Position Note 09/26. November 2009Search in Google Scholar
McKinnon, R. (1984). An International Standard for Monetary Stabilization. Washington: Institute for International Economics.Search in Google Scholar
Mundell, R. (2001). One World, One Money. Options Politiques. May: 10–30.Search in Google Scholar
Mundell, R. (2002). The Sixth Lord Robins Memorial Lecture: Reform of the International Monetary System. In Robert A. Mundell and Paul J. Zak (eds). Monetary Stability and Economic Growth: A Dialogue between Leading Economists. Cheltenham, UK: Edward Elgar.Search in Google Scholar
Nye, J. (2010). The Dollar and the Dragon. Project Syndicate, 12/07/2010.Search in Google Scholar
Obstfeld, M. and K. Rogoff (1986). Rational and Self-Fulfilling Balance-of-Payments Crises. American Economic Review, 76 (1): 72–81.Search in Google Scholar
Obstfeld, M. and K. Rogoff (2009). Global Imbalances and the Financial Crisis: Products of Common Causes. CEPR Discussion Papers, 7606.Search in Google Scholar
Rose, A.K. (2000). One Money, One Market: The Effect of Common Currencies on Trade. Economic Policy, 15 (30): 7–46.Search in Google Scholar
Rosecrance, R. (2010). Bigger is Better. Foreign Affairs, 89 (3): 42–50.Search in Google Scholar
Roubini, N. and B. Saetser (2005). Will the Bretton Woods 2 Regime Unravel Soon? The Risk of a Hard Landing in 2005–2006. NYU Working Paper. New York University.Search in Google Scholar
Saccomanni, F. (2010). The Global Crisis and the Future of the International Monetary System. BIS Review, 55/2010.Search in Google Scholar
Sachs, J. and F. Larrain, (1999). Why Dollarization is More Straitjacket than Salvation. Foreign Policy, 116: 80–93.Search in Google Scholar
Schulmeister, S. (2000). Globalization Without Global Money: The Double Role of the Dollar as National Currency and World Currency. Journal of Post Keynesian Economics, 22 (3): 365–395.Search in Google Scholar
Starr, M. (2004). One World, One Currency: Exploring the Issues. American University Working Paper Series, 2004-01.Search in Google Scholar
Suominen, K. (2010). Did Global Imbalances Cause the Crisis. Voxeu.com, 14 June. http://www.voxeu.org/index.php?q=node/5175Search in Google Scholar
Swainathan, A.A. (2009). An International Monetary Fund Currency to Rival the Dollar? Why SDRs Can’t Play That Role. CATO Institute, No. 10.Search in Google Scholar
United Nations (2009). Report of the Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System. New York.Search in Google Scholar
Zhou, X. (2009). Reform of the International Monetary System. Paper published on the official website of the People’s Bank of China. March 23, 2009. Beijing, China.Search in Google Scholar
© 2010 Edoardo Campanella, published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 International License.
