International Monetary Problems under Globalization

Abstract

Globalization supplies the world economy with ample possibilities of both investing in high yield financial assets and borrowing abroad for investing in domestic projects. But under globlization free capital mobility affects the macro-economic policies of all countries and also global flow of funds tends to be affected by macro-economic policies of major countries.This means that under globalization we need more close macro-economic policy coordination.The most serious problem under globalization is the fact that the U.S.the key country have had large current account deficits for more than twenty years, “automatically” financed by large capital inflow.These features are the result of present “dollar standard system”and we need to re-examine the possibility of international monetary reform.The introduction of the euro is expected to pormote such a movement.