International Monetary Integration Research Articles

Exchange Rate Synchronization for a Set of Currencies from Different Monetary Areas

The degree of co-movement between currencies remains an important subject for international trade and monetary integration across countries. However, the economic literature has given limited answers about the directional relationships among currencies, and whether they have a leader or a driver. Using the Hodrick-Prescott filter and the wavelet methodology, this paper analyzes exchange rate synchronization for a set of twelve currencies belonging to different monetary areas covering the period between January 1980 and July 2020. The empirical results reveal that: i) the U.S. dollar still plays an essential role as a foreign exchange anchor; ii) the euro shows an out-of-phase relationship with the vast majority of currencies, including with the other European currencies; iii) the British pound seems to have departed significantly from the European single currency; iv) the Brazilian real leads the Chinese yuan for most of the sample, and both currencies record great dissimilarities with the other currencies; v) in the absence of short-term foreign exchange market frictions, average bilateral distances between currencies are smaller, and vi) during the international financial crisis, exchange rates became more synchronized.

Monetary integration in the Eurozone and the rise of transnational authoritarian statism

The negotiations over the Eurozone crisis have increasingly come to reflect Poulantzas’ idea of ‘authoritarian statism’, i.e., a decline in the relevance of democratic institutions and a shift in political power towards technical state apparatuses. Yet, scholarly approaches to transnational integration have provided little guidance as to why monetary relations have become such a pronounced point of condensation for the contradictions inherent in European integration. While mainstream theories of monetary unions such as optimal currency area theory neglect the impact of state power and class interests on monetary politics, more critical perspectives on transnational integration have paid insufficient attention to monetary governance and its role in the mediation of international relations. The present paper brings heterodox theories of international relations and monetary integration to bear on the increasingly authoritarian dynamics of Eurozone governance. Reflecting on Bruff’s discussion of authoritarian neoliberalism, we proceed to examine how the circumvention of democratic institutions via Eurozone monetary governance is more precisely captured through the notion of transnational authoritarian statism. We develop this concept in relation to two historical periods of European integration: the formation of the Economic and Monetary Union and the recent extension of the European Central Bank’s scope of monetary governance.

The European Payments Union and the Origins of Triffin’s Regional Approach toward International Monetary Integration

Robert Triffin (1911-1993) played an important role in the international monetary debates in the postwar period. He was known as one of the main advocates of a multipolar international monetary system. In this paper we analyse the origins of riffin’s “regional” approach towards international monetary integration. We argue that Triffin’s experience with the European Payments Union (EPU)played hereby a crucial role. Triffin was not only an “architect” of the EPU, but the EPU also led to an important shift in Triffin’s view of the geography of the international monetary system. Before his work on the EPU, Triffin thought of the international economy as composed of two geographical entities: national economies and the world economy. With his work on the EPU he introduced a third geographical entity: the region. The EPU would so be at the basis of Triffin’s advocacy of a regional approach towards international monetary integration. Moreover, while Triffin was initially quite positive on the IMF, he became, through his EPU experience, more critical of the IMF and its worldwide approach.

‘Whatever it takes’: Polanyian perspectives on the eurozone crisis and the gold standard

The parallels between the monetary politics of the gold standard and that of the eurozone crisis are striking and have informed contemporary debate about the future of European integration. The eurozone crisis has been widely interpreted as the result of a mismatch between international monetary integration and a concomitant lack of fiscal integration, or more broadly as the result of a European Union which is economically integrated, yet politically fragmented. The prospect of a 1930s-style descent into division and nationalism has formed the backdrop against which moves towards extensive integration at the supranational level have been made. Polanyi diagnosed the political effects of monetary integration through his analysis of the gold standard system in The great transformation, making it important that we unpack his analysis and consider carefully how a Polanyian perspective might apply to the eurozone today. I argue that Polanyi encourages us to look beyond ‘monetary vs. fiscal’ and ‘economic vs. political’ characterizations of European integration, and instead to examine how such oppositions are formed in the first place and how they constrain political debate, particularly in terms of how ‘sound money’ is established as the highest policy concern. Through a re-reading of Polanyi's distinction between ‘all-purpose’ and ‘special-purpose’ money, I highlight how, despite the huge efforts undertaken to preserve the identity of the euro as an all-purpose currency, the eurozone crisis has rendered visible a series of latent conflicts between the different functions of money. This analysis moves us away from the ‘monetary vs. fiscal’ integration view of the eurozone crisis and towards a more open study of how the various possible purposes of money are being articulated and challenged, offering some limited hope for alternatives to the current eurozone policy agenda.

Currency Competition: A Hayekian Perspective on International Monetary Integration

Currency internationalization is examined from the vantage point of Friedrich Hayek's contributions in the 1970s. Compared with received commentaries in which only an idealized case for private money is attributed to Hayek, this paper underscores other dimensions of Hayek's work on money and currency. Hayek's case for “choice in currency” draws on his theory of competition, anticipates competition between government suppliers of fiat money, accommodates many aspects of international monetary integration, and embodies a distinctive approach to monetary independence, choice of exchange rate regime, and the transnationalization of currency. Hayekian predictions are outlined for future developments in currency competition.

Comments on R. Cooper, M. Bordo and H. James: A Schumpetrian view on monetary integration options and historical dynamics

The paper by Cooper (2006) proposes a common Triad Currency for the future and argues that such broad international monetary integration will be useful for advanced OECD economies. The author argues that the countries involved must be democracies since otherwise there would be a serious problem with legitimacy of the new common currency. The main rationale is that financial transactions are subject to bandwagon effects and as financial transactions increasingly dominate foreign exchange markets, flexible exchange rates in the Triad imply considerable risks of distortions in trade and foreign direct investment as well as periodic protectionist pressures. With a common triadic currency, say a Europe–Nippon–America currency (dubbed ENA — this name should be quite popular among the political elite in France) which aims at stabilizing producers’ prices one should, according to Cooper, expect no major problems in stabilization policy. He also argues that the common currency should be associated with a focus of the new common institution, a Board of Governors, on a sound and smooth functioning of the financial system; the Board could be made up of pre-existing central bank governors or of individuals appointed to long terms. The Board would be accountable — not necessarily to a supranational parliament; rather the ministers of finance, with votes weighted by GNP, could be a controlling body and ministers in turn are accountable to national parliaments. The Board’s decision could be overruled by a strong vote of national governments as represented by the ministers of finance. The common currency eliminates asymmetrical monetary shocks, and the EU, Japan and the US are considered to be diversified enough to be able to cope rather easily with the then relatively small external shocks from outside the Triad. Offsetting stabilizing fiscal policy, while putting a strong focus on the nontradables sector, could be used in the event of adverse shocks. As Cooper indicates, high medium term swings in the $-Yen rate of some 70% in the period from 1995 to 1998

Regional and international currency arrangements: introduction

The papers in this Special Issue were commissioned for a joint conference organized by the Bank of Greece and the Oesterreichische Nationalbank in February 2006. The surprisingly successful monetary union, the European Economic and Monetary Union, and the interest of other regions emanating from the European experiment, provided the motivation for the conference theme. This Special Issue brings together papers that, together, provide a comprehensive assessment of the latest thinking on the issues of regional and international monetary integration. The authors of the essays are renowned experts in the field, having worked extensively on economicand monetary-integration issues. In addition, each of the positions taken and conclusions reached is critically assessed by discussants, who are academics and/or practitioners in the field of international monetary integration. We hope these essays provide the reader with a well-rounded, comprehensive view of the cost–benefit analysis of monetary unions in Europe and regions outside Europe. We believe that these contributions will merit careful study by all those seriously interested in this subject matter. We would like to acknowledge the generous support of the Bank of Greece and the Oesterrreichische Nationalbank, in particular, their respective Governors, Nicholas Garganas and Klaus Liebscher, as well as Executive Director of Oesterrreichische Nationalbank Josef Christl. Their support was crucial for the success of the conference. In what follows, we provide a brief overview of the main themes presented by the authors of the papers. In his paper, Otmar Issing assesses the applicability of optimum-currency-area (OCA) analysis to the euro-zone context. He notes that euro-area countries do not perform well in terms of the OCA criteria compared with the United States. In fact, a IEEP (2006) 3:175–179 DOI 10.1007/s10368-006-0053-5

Optimum Currency Areas and Key Currencies: Mundell I versus Mundell II

AbstractThe East Asian economies are increasingly integrated in trade and direct investment. More than 50 per cent of their foreign trade is with each other. Both the high growth and level of trade integration is similar to what the western European economies achieved in the 1960s. So, in the new millennium, the inevitable question arises: is East Asia also an optimum currency area (OCA)? Despite the apparent success of EMU, many writers familiar with the East Asian scene think not. Taking the seminal papers of Robert Mundell as the starting point, this article first analyses traditional theorizing on the pros and cons of international monetary integration and then suggests new approaches to the problem of international risk‐sharing in OCAs.

Inflation targets versus international monetary integration: a Canadian perspective

The debate about Canadian–US monetary integration is surveyed. The choice is not just among exchange rate regimes, but among overall monetary orders, and questions of policy credibility and political accountability are crucial to it. Canada’s recent economic performance under inflation targets, and arguments that the flexible exchange rate has undermined real economic performance are assessed. The most economically attractive among alternative monetary orders—the adoption by Canada of the US dollar with provision for meaningful Canadian input into policy decisions and supervision of the financial system—is not politically attainable. Intermediate arrangements are unattractive and clearly inferior to Canada’s current monetary order.

Inflation Targets Versus International Monetary Integration - a Canadian Perspective

The debate about Canadian-U.S. monetary integration is surveyed. The choice is among overall monetary orders, rather than exchange rate regimes, and questions of policy credibility and political accountability are crucial. Canada's recent economic performance under inflation targets, and arguments that the flexible exchange rate has undermined real economic performance, are assessed. The most economically attractive among alternative monetary orders, the adoption by Canada of the US dollar with provision for meaningful Canadian input into policy decisions and supervision of the financial system, is not politically attainable. Intermediate arrangements are unattractive and clearly inferior to Canada's current monetary order.

On Economic Sovereignty: European Nation-States Between Globalization and Regional Integration

European monetary unification has once again brought the issue of national economic sovereignty to the front: often regarded as the quintessential attribute of national sovereignty in the realm of economics, monetary powers have been most solemnly foregone and transferred to a supranational authority, independent from political bodies. Insistence by the French minister of Finance that restructuring French banking sector should take place within the national borders, frustration over the impossibility for continental member states to go on imposing an embargo over British beef, the opening of the so-called Millennium round of international trade negotiations in late November in Seattle, the loud reactions of the German government and press to the hostile takeover bid over Mannesmann, a giant “German” telecommunication company, by the “British” Vodafone: over recent months, there have been many examples of the ambivalent way in which European nation states react to the consequences of globalization and international monetary integration.

MONEY AND THE NATION-STATE: CONTESTED BOUNDARIES OF MONETARY SOVEREIGNTY IN GEOPOLITICS

Has international monetary integration undermined monetary sovereignty? In this paper, a sociological approach is taken towards two of the major conditions which are reputed to have contributed to the erosion of monetary sovereignty: financial deregulation and the growth of offshore markets. In the first section, the reconstruction of international monetary and financial networks is examined with particular reference to Japan, Germany and Britain. The concept of deregulation is questioned as a description of the regulatory changes which took place in these financial centres during the 1980s. In the second section, this argument is extended in an examination of the development of offshore markets during the past thirty years. These markets have relied upon substantial government encouragement, in addition to a high proportion of sovereign funds, in order to expand at the rate that they have: any perceived threat to monetary sovereignty posed by such markets must therefore be treated with caution. In the concluding section, the implications of monetary integration for two `contested boundaries' within contemporary sociology - between geopolitics and international markets, on the one hand, and economy and society, on the other - are outlined, both in the context of debates over monetary sovereignty and in the light of arguments about the `embeddedness' of economic action in recent sociological approaches to economic life.

The Sociology of Money: Economics, Reason and Contemporary Society

Preface. Introduction: On the Nature of Money. Part I:. 1. The Political Economy of Money. 2. Money and the State. 3. Cultural Aspects of the Mature Money Economy. 4. Money and the Social System. Part II:. 5. The Politics of International Monetary Integration. 6. Money in Postmodern Economics. 7. High Modernity, Rationality and Trust. 8. Monetary Analysis in Social Theory. Bibliography. Index.

Interest rate harmonisation among selected industrial countries 1961(1)–1970(12)

A number of studies have examined international monetary integration during periods of fixed exchange rates and mobile capital. These studies have not only failed to reach a concensus but have been deficient in their treatment of serial correlation and lag structures. This paper highlights these two aspects and indicates the presence of considerable integration, the nature of which conforms with theory more satisfactorily over the period 1961(1)–1967(6) than over the period to 1970(12) usually taken as relevant. In contrast with much of the literature no lagged relationship is found to exist between the Eurodollar and US rates over this period. As expected, covered rates exhibit greater dependence upon external influences than uncovered.