Global Disequilibrium and International Monetary Reform

Abstract

This paper explores the links between global imbalances and international monetary reform. These links are both imaginary and real. They are imaginary in the sense of the argument that international monetary reform, understood as a return to some form of fixed exchange rate regime, is impossible in the face of current-account imbalances. They are real in the sense that a viable system of international monetary relations must include a mechanism for the adjustment of current-account imbalances to sustainable levels and that adopting fixed exchange rates in the absence of such a mechanism is likely to prove self-defeating.