Currency Competition Research Articles

Two crises and two Chinas

To paraphrase Tolstoy, every crisis is a crisis in its own way, but good comparisons often sharpen our understanding. This paper contrasts the approaches taken to the crises with Saddam Hussein and in East Asian ®nancial markets. Since the East Asian crisis is the more general subject of this symposium, this presentation borrows some duality from the East. In the spirit of yin and yang, we address two topics, each with two parts. After addressing the two crises, we compare two Chinas, the one before the East Asian crisis, and the China of today (April 1998). We discuss China because it could set off a new round of competitive currency depreciation in Asia, because, as the world's most populous country, its relationship with the United States is likely to be crucial to U.S. security interests in Asia and worldwide, and because it has received relatively little attention in relation to the East Asian crisis. We start by comparing the two crises.

Money in a globalized world: From monopoly to oligopoly

When addressing issues of global finance, we are accustomed to thinking of money as effectively insular: each currency sovereign within the territorial frontiers of a single state or monetary union. In fact, cross‐border currency competition has become increasingly prevalent. Money today is effectively deterritorialized. What does this mean for national monetary sovereignty? A strictly territorial currency privileges government in relation to societal actors. Conversely, the benefits of monetary sovereignty are noticeably compromised by currency deterritorialization, which gives the private sector a critical degree of leverage over public policy. So long as governments remain the main source of money, however, the state still retains a significant role. Monetary sovereignty has been not so much lost as transformed. Where once existed monopoly, we now find oligopoly—a finite number of autonomous suppliers, national governments, all vying ceaselessly to shape and manage demand. Globalized money, at its most basic, is a political contest for market loyalty.

Level of Economic Understanding for Senior High School Students in Ohio

The level of economic understanding of 665 11th- and 12th-grade students in southeast Ohio was examined in this study. The Test of Economic Literacy (TEL), a standardized, multiple-choice test designed to measure a student's level of economic understanding, was administered to 665 students. The students' scores were analyzed and compared with national averages for the TEL. The 3 subjects the students understood best were currency exchange, competition, and types of economic systems. The 3 subjects the students understood least were market failures, inflation, and scarcity of resources.

Hayekian Approach to Competition in Monies and the New Dynamic of Financial Markets

International monetary cooperation has long worried about competition of currencies under flexible exchange rates. The Gold standard, the Gold exchange standard and the Bretton Woods system all have one thing in common: fixed parity. Since the latest collapses in 1971, the American dollar has encountered strong competition from the European and Japanese currencies. This reality raises the question of whether it is economically viable at a national level to consider money as a commodity that is subject to the laws of supply and demand. The topic is not new and has occupied the literature at an institutional level as well as at industrial and political levels. There is an abundant literature on free banking and on currency substitution. Nevertheless while the concept of competition is still debated by economists the world over, the government monopoly on money is rarely questioned. I find that Hayek's perceptions on the government monopoly of the issue of money are fairly well articulated, critical and grounded. Moreover, Hayek breaks new ground by advocating trade in monies. Therefore, it is useful to tackle the subject of currency competition from Hayek's point of view. To do so, this paper is subdivided into two parts. Section one introduces Hayek's criticisms of the present money issuance system. It explains his proposals for implementing a market and the resulting macroeconomic implications. The objective of the second section is to analyze the competitive theory in terms of historical experiences and in the light of new dynamics in financial institutions.

The Road to Monetary Union in Europe: The Emperor, the Kings, and the Genies.

This book provides an indispensable guide to the economic, political and diplomatic process that led to the creation of the European single market and the signing of the Maastricht Treaty. In this new, expanded edition Padoa-Schioppa presents a lucid assessment of the opportunities and risks that EMU entailed; assesses the economic, monetary, political, and institutional significance of the euro; and reconsiders the rationale and underlying philosophy of EMU in the light of recent developments. Padoa-Schioppa has brought together a selection of his papers and speeches, covering 1982-94, from his work as Deputy Director General of the Banca d'Italia, and has edited them thoroughly to illuminate the recent history of European integration. A central theme of his book is the belief that a group of sovereign countries cannot for long sustain free trade, unrestricted capital movement, fixed exchange rates and full autonomy of national macroeconomic policies, and so need to move towards a single currency. He discusses extensively such issues as the single currency, the tasks of a European central bank, the ECU, the role of budgetary rules, currency competition, and the relationship between EMU and political union. The author has created an insider's guide to this topical issue for students, academics, policymakers and commentators alike. This book contains extracts from documents and an extensive chronology which will be of particular use for readers.

Monetary union or currency competition? Currency arrangements for monetary stability in East and West

Recent events in the European Monetary System on the one hand and monetary disintegration in the former Soviet Union on the other hand have revived interest in the question of how to design and choose a monetary regime for both parts of Europe that ensures monetary stability. The objective of monetary stability can be achieved either by complete monetary union or by currency competition. Building on Hayek's ideas, I argue that both regimes are viable solutions depending on the circumstances. The paper first focuses on the misperceived benefits of flexible exchange rates, making the case for monetary union in Western Europe. However, monetary union is no alternative for Eastern Europe and the former Soviet Union. Instead currency competition could be used to retain the benefits of flexible exchange rates and to foster monetary stability at the same time.

The road to monetary union in Europe: the emperor, the kings, and the genies

Dr Padoa-Schioppa has provided an indispensable guide to the economic, political and diplomatic process of European movement towards union. The author has presented a lucid assessment of the opportunities and risks involved in economic and monetary integration, based on his twelve-year involvement in the heart of European monetary affairs. Tommaso Padoa Schioppa has brought together a selection of his papers and speeches, covering 1981-92, from his work as Deputy Director General of the Banca d'Italia, and has edited them thoroughly to illuminate the recent history of European integration. A central theme of his book is this belief that a group of sovereign countries cannot for long sustain free trade, unrestricted capital movement, fixed exchange rates and full autonomy of national macroeconomic policies, and so need to move towards a single currency. He discusses extensively such issues as the single currency, the tasks of a European central bank, the ECU, the role of budgetary rules, currency competition, and the relationship between EMU and political union. The author has created an insider's guide to this topical issue for students, academics, policymakers and commentators alike. This book contains extracts from documents and an extensive chronology which will be of particular use for readers.

The Sung and Ming paper monies: Currency competition and currency bubbles

This paper shows that the collapse of the paper money system of the Ming dynasty (1368–1644) was not due to a runway printing press but due to the existence of competing metallic currencies, which increased the interest elasticity of paper money demand and thus raised the possibility of self-generating hyperinflation. A leaning-with-the-wind feedback rule from prices to money supply followed by the Southern Sung government (1127–1279), however, seems to have prevented a self-generating inflation from arising.

The Road to Monetary Union in Europe: The Emperor, the Kings, and the Genies

This book provides an indispensable guide to the economic, political and diplomatic process that led to the creation of the European single market and the signing of the Maastricht Treaty. In this new, expanded edition Padoa-Schioppa presents a lucid assessment of the opportunities and risks that EMU entailed; assesses the economic, monetary, political, and institutional significance of the euro; and reconsiders the rationale and underlying philosophy of EMU in the light of recent developments. Padoa-Schioppa has brought together a selection of his papers and speeches, covering 1982-94, from his work as Deputy Director General of the Banca d'Italia, and has edited them thoroughly to illuminate the recent history of European integration. A central theme of his book is the belief that a group of sovereign countries cannot for long sustain free trade, unrestricted capital movement, fixed exchange rates and full autonomy of national macroeconomic policies, and so need to move towards a single currency. He discusses extensively such issues as the single currency, the tasks of a European central bank, the ECU, the role of budgetary rules, currency competition, and the relationship between EMU and political union. The author has created an insider's guide to this topical issue for students, academics, policymakers and commentators alike. This book contains extracts from documents and an extensive chronology which will be of particular use for readers.

Currency Competition, Network Externalities and Switching Costs: Towards an Alternative View of Optimum Currency Areas

Existing models of currency competition and monetary union ignore network effects and switching costs. This paper develops a simple model that incorporates these features and shows how it can be used to shed light on observed monetary experience and current issues in international monetary relations. It explains why agents will often be reluctant to switch currencies, highlights the role of expectations, and sheds light on the nature of currency competition and the effect of legal restrictions. Copyright 1993 by Royal Economic Society.

Milton Friedman, Silver, and China

Previous articleNext article No AccessCommentMilton Friedman, Silver, and ChinaThomas G. RawskiThomas G. Rawski Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Journal of Political Economy Volume 101, Number 4Aug., 1993 Article DOIhttps://doi.org/10.1086/261896 Views: 12Total views on this site Citations: 12Citations are reported from Crossref Copyright 1993 The University of ChicagoPDF download Crossref reports the following articles citing this article:Bo Chen, Dan Li, Yiqing Xie Silver, fiduciary money, and the Chinese economy, 1890–1935, Review of International Economics 30, no.44 (Dec 2021): 939–970.https://doi.org/10.1111/roie.12590Fabio Braggion, Alberto Manconi, Haikun Zhu Credit and social unrest: Evidence from 1930s China, Journal of Financial Economics 138, no.22 (Nov 2020): 295–315.https://doi.org/10.1016/j.jfineco.2020.05.001Debin Ma, Liuyan Zhao A silver transformation: Chinese monetary integration in times of political disintegration, 1898–1933†, The Economic History Review 73, no.22 (May 2020): 513–539.https://doi.org/10.1111/ehr.12939Liuyan Zhao, Yan Zhao Alfred Marshall, Silver, and China, Australian Economic History Review 58, no.22 (Jul 2017): 153–175.https://doi.org/10.1111/aehr.12138Fabio Braggion, Alberto Manconi, Haikun Zhu International Liquidity Shocks, the Real Economy, and Social Unrest: China, 1931-1935, SSRN Electronic Journal (Jan 2015).https://doi.org/10.2139/ssrn.2714815Tai-kuang Ho, Cheng-chung Lai Silver fetters? The rise and fall of the Chinese price level 1928–34, Explorations in Economic History 50, no.33 (Jul 2013): 446–462.https://doi.org/10.1016/j.eeh.2013.03.001Tai-kuang Ho, Cheng-chung Lai, Joshua Jr-shiang Gau Equilibrium and adjustment of exchange rates in the Chinese silver standard economy, 1928–1935, Cliometrica 7, no.11 (Jan 2012): 87–98.https://doi.org/10.1007/s11698-012-0079-6Paul B. Trescott Western economic advisers in China, 1900–1949, (Mar 2015): 1–37.https://doi.org/10.1108/S0743-4154(2010)000028A004David Denzer-Speck Currency Competition in China Between 1850 and 1950 A Case Study on Hayek's Denationalised Money?, Kredit und Kapital 42, no.33 (Jul 2009): 327–351.https://doi.org/10.3790/kuk.42.3.327Richard C.K. BURDEKIN US pressure on China: Silver flows, deflation, and the 1934 Shanghai credit crunch, China Economic Review 19, no.22 (Jun 2008): 170–182.https://doi.org/10.1016/j.chieco.2007.08.002N. Horesh "Many a Long Day": HSBC and Its Note Issue in Republican China, 1912-1935, Enterprise and Society 9, no.11 (Apr 2008): 6–43.https://doi.org/10.1093/es/khm101Bruce D. Smith Mischief and monetary history Friedman and Schwartz thirty years later, Journal of Monetary Economics 34, no.11 (Aug 1994): 27–46.https://doi.org/10.1016/0304-3932(94)90057-4

European Financial Integration.

List of figures List of tables Preface List of conference participants Foreword 1. Introduction 2. Banking competition and European integration 3. Banking, financial intermediation and corporate finance 4. How (not) to integrate the European capital markets 5. European financial regulation: a framework for policy analysis 6. Corporate mergers in international economic integration 7. Capital flight and tax competition: are there viable solutions to both problems? 8. Reflections of the fiscal implications of a common currency 9. Currency competition and the transition to monetary union: does competition between currencies lead to price level and exchange-rate stability? 10. Currency competition and the transition to monetary union: currency competition and the evolution of multi-currency regions 11. Problems of European monetary integration Index.

Obstacles to the Use of the ECU: Macroeconomic Aspects

The Delors Committee 'agreed that there should be no discrimination against the private use of the ECU and that existing administrative obstacles should be removed'. (Delors, i989, para. 49) Work is being done to follow up that recommendation.' A recent report by Ernst and Young2 notes that the administrative obstacles are not considered to be a major problem by most businesses. As anyone familiar with the continuing debate over the use of the ECU will know the obstacles are not purely administrative. The future of the private use of the ECU cannot be considered in isolation from the future of the ECU as the single currency of the Community once the process of economic and monetary union is completed. The purpose of this paper is to provide the necessary macroeconomic background to an assessment of the microeconomic arguments for a wider use of the ECU and to consider what the implications might be at a macroeconomic level of a spontaneous movement to adopt the ECU as a common European currency even in advance of the political process of economic and monetary union (EMU). We begin by describing briefly the advantages of a common currency, and more particularly of a single currency, within Europe. We then ask whether these advantages might come about spontaneously. This leads us into a short discussion of the possible results of' currency competition' in advance of further progress towards EMU. With that scenario we contrast one in which the steps towards EMU are announced well in advance, making clear what the future role of the ECU is intended to be. We give our reasons for preferring this second scenario to the first. The next section considers how the wider use of the ECU might be encouraged over the next year or two. We discuss, but only briefly, the possibility of converting the ECU from a 'currency basket' into an independent currency in its own right; and in more detail, the scope for using the ECU more extensively in foreign exchange market intervention, with particular reference to its role in the development of a common monetary policy within the Community. Our final section is concerned with longer-term issues, corresponding to stages 2 and 3 of the Delors Report. It is important to have in mind at least

Currency Competition and European Monetary Integration

Currency Competition and European Monetary Integration

Competitive Currencies, Legal Restrictions, and the Origins of the Fed: Some Evidence from the Panic of 1907

In the last several years, economists have produced numerous studies examining both the theoretical operations and historical manifestations of unregulated banking systems. Recent examples of historical investigations are the studies by L. White [47], who explores the Scottish experience, Selgin [33] on China, and Timberlake [43], Gorton [12], and Mullineaux [20], all of whom examine the role of clearinghouses prior to the creation of the Federal Reserve System in the United States. Timberlake and Gorton emphasize the role that currency substitutes played during banking panics of that era. The present paper seeks to explore the issuing of currency substitutes during the fall of 1907 in greater detail. In particular, it seeks to explain precisely why currency substitutes were needed and how they became accepted and to examine the implications of the panic for both traditional and present arguments over the historical justifications for the Fed.

Rules, commitment, and the search for stable money: A review essay

Political economists have always criticized existing monetary institutions and struggled to articulate a vision of an ideal monetary system. The volume under review, The Search for Stable Money: Essays on Monetary Reform, edited by James A. Dorn and Anna J. Schwartz (University of Chicago Press, 1987), stands firmly in this tradition; it addresses the shortcomings of modern monetary institutions and debates the merits of various alternative arrangements. The volume consists of nineteen essays and a number of short comments. Among the contributors are three Nobel prize winners (Buchanan, Friedman, and Hayekthough Buchanan simply comments on Bernholz). Generally speaking, the essayists disapprove of the virtually unlimited discretion invested in the Federal Reserve: they argue that discretion leads to unnecessarily high and variable rates of inflation. The essayists also agree that the solution ought to take the form of a change in the political rules which would have the effect of limiting government control over the monetary system, Beyond this there is no consensus. The contributors consider money growth rules, the gold standard, a proposal for a compensated dollar, and competitive currency systems, but often find one another's proposals as objectionable as the status quo. The essays in this volume are about five years old; with the exception of the introductory piece by James Dorn, each was originally published elsewhere. Most originally appeared in the Cato Journal in 1983. Sometimes the age of the essays shows. Careful analysis of Federal Reserve policy in 1981-82 was no doubt of topical interest when the essays were written, but is less so now.

Currency Competition in Switzerland, 1826‐1850

SUMMARYCurrency competition provided a stable monetary standard in those Swiss cantons that deregulated their financial systems after liberal revolutions in the 1830s and 40s. The Swiss currency issuers’ concern with purchasing power stability suggests that each of them faced a real demand for notes that was sensitive to expected changes in the purchasing power of those notes. Given purchasing power stability, the circulation of a currency depended on the quality of the financial services of its issuer. Issuing and keeping notes in circulation was costly. The share of notes in the balance sheets of their issuers was therefore small except in periods when interest rates on other debt instruments were high.ZUSAMMENFASSUNGFreie Konkurrenz zwischen Währungen garantierte monetäre Stabilität in jenen Schweizer Kantonen, die nach liberalen Revolutionen zwischen 1830 und 1850 ihr Währungssystem reformierten. Die Beachtung, die die schweizerischen Notenprodu‐zenten der Kaufkraftstabilität schenkten, legt nahe, dass die reale Banknotennach‐frage von der erwarteten Kaufkraftveränderung abhing. Bei gegebener Kaufkraft ist die Zirkulation einer Währung durch die Qualität der finanziellen Dienstleistungen ihres Anbieters bestimmt. Die Ausgabe von Banknoten verursacht Kosten, und es ist teuer, sie im Verkehr zu halten. Daher war der Anteil von Banknoten in der Bilanz ihrer Anbieter gering, ausser in Zeiten, in denen der Zins auf anderen Finanzierungs‐instrumenten hoch war.RÉSUMÉLa concurrence monétaire libre eut comme résultat une stabilityé monétaire pour les cantons suisses qui avaient réformé leurs systèmes monétaires après les révolutions libérales des années 1830 et 1840. L'importance que les émetteurs monétaires suisses attribuaient à la stabilityé du pouvoir d'achat suggère que la demande pour les billets de banque dépendait de la variation escomptée du pouvoir d'achat. Pour un certain pouvoir d'achat, la circulation monétaire est déterminée par la qualityé des services financiers de l'émetteur. L'émission des billets de banque et leur maintien en circulation est une affaire cou̧teuse. Dans le bilan des émetteurs, la contribution des billets de banque était done insignifiante, sauf dans les périodes où d'autres instruments de dette étaient sujets à des intérȩts éleves.

What do we know about Currency Competition?

What do we know about Currency Competition?

The Government's Money Monopoly: Externalities or Natural Monopoly?

SUMMARYDoes externality theory provide a basis for the government's monopoly in the production of base money? Money, as has been shown, is not a public good because it does not satisfy the non‐rivalness criterion (nor the non‐excludability criterion). Like any public decision, political agreement on a common money or unit of account (i. e., exchange rate fixity) passes the non‐rivalness test. However, whether the imposition of a common money or monetary unit is a public good or a public bad depends on whether money is a natural‐monopoly good or not. Hence, there is no independent public‐good justification for the government's money monopoly. The public good argument is redundant. Whether money is a natural monopoly good cannot be determined a priori, but only on the basis of experience. If governments are natural money monopolists, they should have gained their monopoly position by prevailing in the market. Historically, this is not the case. The only valid test of the natural monopoly argument is to abolish all barriers to entry and to admit free currency competition from private issuers on equal terms. An international cross‐section estimate of money demand functions reveals only weak evidence of social economies of scale in the use of money. By contrast, choice among currencies is shown to be strongly affected by restrictions of convertibility.

The Moral Hazard of IMF Lending

The World EconomyVolume 6, Issue 3 p. 291-304 The Moral Hazard of IMF Lending Roland Vaubel, Roland Vaubel ROLAND VAUBEL: Senior Research Fellow, Institut für Weltwirtschaft, University of Kiel; formerly Professor of Economics, Erasmus University, Rotterdam; author of Strategies for Currency Unification: the Economics of Currency Competition and the Case for a European Parallel Currency (1978).Search for more papers by this author Roland Vaubel, Roland Vaubel ROLAND VAUBEL: Senior Research Fellow, Institut für Weltwirtschaft, University of Kiel; formerly Professor of Economics, Erasmus University, Rotterdam; author of Strategies for Currency Unification: the Economics of Currency Competition and the Case for a European Parallel Currency (1978).Search for more papers by this author First published: September 1983 https://doi.org/10.1111/j.1467-9701.1983.tb00015.xCitations: 43Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Citing Literature Volume6, Issue3September 1983Pages 291-304 RelatedInformation