Comments on R. Cooper, M. Bordo and H. James: Exchange rate arrangements and disarrangements: prospects for a world currency |
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Authors: | Sergio L Schmukler |
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Institution: | (1) Development Research Group, The World Bank, 1818 H Street NW, Washington, DC 20433, USA |
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Abstract: | This note evaluates the prospects for a world currency, using as a departure point the papers by Bordo and James (2006) and Cooper (2006). The note argues that a world currency is unlikely in the foreseeable future and probably undesirable. Although more evidence
is needed, there seem to be no strong forces towards the creation of new monetary unions among the countries with major currencies
or between those countries and the periphery. Based on recent experience, the note also argues that one of the main benefits
to establish a world currency, the elimination of exchange rate uncertainty, is likely less important than commonly believed.
No matter how rigid a currency arrangement is, initiatives to dissolve it tend to appear as bad times arise. Still, the present
equilibrium of no world currency leaves unresolved many difficult issues related to the functioning of the domestic and international
monetary systems.
Sergio L. Schmukler has prepared this note as a comment to the papers “Proposal for an OECD Currency” by Richard N. Cooper
and “One World Money, Then and Now” by Michael Bordo and Harold James, presented at the conference “Regional and International
Currency Arrangements,” February 24 and 25, 2006, Vienna, Austria, organized by the Bank of Greece and the Oesterreichische
Nationalbank (Central Bank of Austria). I thank conference participants for useful comments. I am also grateful to Jose Azar
and Francisco Ceballos for excellent research assistance. The views expressed in this paper are entirely those of the author
and do not necessarily represent the opinion of the World Bank. |
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Keywords: | Currency regimes Currency union Floating exchange rates Peg Financial crises |
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