Two Cases for Sand in the Wheels of International Finance

The incompatibility of pegged exchange rates, international capital mobility and national monetary autonomy is a basic postulate of open economy macroeconomies. In the present environment of high capital mobility and political uncertainty, even the possibility that governments may utilize their policy autonomy can defeat efforts to peg the exchange rate. This leaves two possibilities. One is to fix the exchange rate irrevocably through monetary unification. The other is to live with floating rates. Either way, a case can be made for "throwing sand in the wheels" of international finance. Where monetary unification is not an option, this is a may to make distinct national currencies tolerable and international money and capital markets compatible with modest national autonomy in monetary and macroeconomic policy. For. EU counties striving to create a monetary union, it is the only politically and economically feasible way of completing the transition to Stage III of the Maastricht process.


Issue Date:
1994-12
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/233396
Total Pages:
27
JEL Codes:
F0; F3
Series Statement:
Working Paper
C94-45




 Record created 2017-04-01, last modified 2017-12-08

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