Chapter

A Modest Proposal for International Monetary Reform<sup>1</sup>

Bruce Greenwald and Joseph E. Stiglitz

in Time for a Visible Hand

Published in print January 2010 | ISBN: 9780199578801
Published online February 2010 | e-ISBN: 9780191723285 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199578801.003.0017

Series: Initiative for Policy Dialogue

A Modest Proposal for International Monetary Reform1

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Greenwald and Stiglitz argue that an ideal system of international payments should be characterized by stability and balance: stability in exchange rates and the absence of sudden crises, and balance in the sense that individual national economies should suffer neither from deflationary effects of chronic external deficits nor the distorting consequences of chronic external surpluses. Both requirements are essential to the efficient international movement of goods and resources. Yet neither requirement appears to have been met by the current dollar‐based reserve currency system. Recurrent crises in Asia, Latin America, and Eastern Europe, and chronic and growing U.S. payments deficits (with their associated deflationary impact) are longstanding characteristics of the current system.

Keywords: international monetary system; reserves; stability; equity; proposal for a world reserve system

Chapter.  12017 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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