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Abstract
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.