International Monetary System Research Articles

Economist as public intellectual: Max Corden’s journey through life

AbstractThis paper examines the intellectual contributions of Professor W. M. (‘Max’) Corden to Economics. We focus on three main fields: trade theory and practice, especially his pioneering work on the theory of effective protection; open economy macroeconomics, including exchange rate policy, the international monetary system, Dutch Disease and economic crises; and Australian economic policy. We emphasise Max's motivation for working on these topics, as he sought to understand real‐world economic issues and challenges and to employ economic theory and expositional clarity in search of policy reform. We also draw attention to his personal life history, and how it has shaped his thinking on major economic and political questions.

LEGAL PROTECTION TOWARDS EXPORTERS AND IMPORTERS IN INTERNATIONAL TRADE TRANSACTIONS USING LETTER OF CREDIT (L/C) AS A PAYMENT SYSTEM AT PT. BANK MAYBANK INDONESIA TBK BRANCH OF BENGKULU

This study aims to examine and to analyze the legal protection of exporters and importers in international trade transactions using Letter of Credit (L/C) as a payment system at PT. Bank Maybank Indonesia Tbk branch of Bengkulu. The type of this study was normative legal research with descriptive analytical research design. The result of this study indicated that in an international payment system that used L/C, both exporters and importers were protected, thus exporters did not have to worry about their goods not being paid for, while importers did not need to worry that the goods they bought did not arrive or that they would lose payment, because the bank would guarantee this matters if the required documents were appropriate. PT. Bank Maybank Indonesia Tbk branch of Bengkulu, in protecting its customers, must have considerations both based on the provisions of national banking regulations and based on the applicable banking practices. The efforts made by banks to protect exporters and importers were such as banks have to implement good corporate governance, apply Know Your Customer principles including the principle of prudence in providing L/C facilities, apply the Know Your Employee principle. Moreover, it was necessary to apply optimal sanctions in case of violation of procedures. The L/C arrangements at PT. Bank Maybank Indonesia Tbk branch of Bengkulu adheres to UCP 600 so that it can avoid differences or misinterpretation between the transacting parties as far as possible.

LIBERALIZAÇÃO DO MOVIMENTO DE CAPITAIS E OS DESAFIOS JURÍDICOS E MONETÁRIOS PARA O BRASIL INTEGRAR A ORGANIZAÇÃO PARA A COOPERAÇÃO E DESENVOLVIMENTO ECONÔMICO (OCDE)

Brazil's adherence to the OECD Code of Liberalisation of Capital Movements may increase its capacity to attract foreign investments - at least, this is the official discourse. Nevertheless, the Code's binding structure may reduce its power to secure legal mechanisms for managing capital movements, especially in times of crisis. For a country placed on the periphery of the international monetary system hierarchy, there are challenges to be considered. The purpose of this article is to discuss the legal structure of the OECD's Code, in contrast to institutional view on capital flows of the IMF, of which Brazil has been a member since 1946. This article also proposes approaches for national diplomatic actions, which can contribute to the construction of the OECD's decisions related to the Code to meet the demands of emerging economies such as Brazil.

Crypto currency's "economic nature" in the light of new monetary theory

The systemic and functional analysis of economic nature of Crypto currency within the modern theory of money is a necessary essential component of the study that allowed the authors to formulate a vision of social and economic model of future international monetary system. The authors consider the substance of money in a dialectic unity of the transformation of forms and spheres of its being. The forms of being of money are: material, monetary, paper, electronic. The spheres of being of money are: social, - the "symbol money"; economic, - the "bank notes"; political and legal, - "monetary units". In this paper we show that money is a financial instrument. Money is a market form of universal claim to a share in the wealth of society. The uncovering of internal intrinsic structure of money allows the authors to show convincingly that a currency, especially a "Crypto currency", cannot have and does not have an "economic nature". In considering the process of historical transformation of international monetary systems, taking into account the real achievements of financial, information, program and social engineering for the creation of a digital "gold" the authors believe that the social and economic model of future international monetary system has received its real approbation.

International monetary system

International monetary system

Central Banks’ Monetary Policy in the Face of the COVID-19 Economic Crisis: Monetary Stimulus and the Emergence of CBDCs

This article analyzes the monetary policy of major central banks during the economic crisis generated by the COVID-19 pandemic. Rising public debt in many countries is being financed through asset purchases by monetary authorities. Although these stimulus policies predate the pandemic, they have been significantly boosted as many governments face large financing needs. We have been in a low interest rate environment for years and some governments have issued debt securities at negative rates. In addition, the rise of decentralized cryptocurrencies, based on blockchain technology, has created greater competition in the international monetary system and many governments have considered the creation of centralized virtual currencies, known as central bank digital currencies (CBDCs). We will analyze some relevant cases, with an emphasis on the digital euro project. The methodology is based on the analysis of the evolution of monetary variables. Pearson’s correlation will be used to establish some relationships between them. There is a strong similarity in the expansionary monetary policies of central banks. Although the growth of the money supply has not been passed on to the CPI, it has been passed on to the financial markets and the price of assets such as Bitcoin or gold.

Oil and Financialization: Another Relation

ABSTRACT The conception of financialization and the impacts of the oil market will be presented in this work from an alternative perspective. Financialization will not be analyzed as a dominance of finance over industry, as if these two sides of the productive process were dissociated. Financialization will be understood as a moment of expansion of a mechanism of domination, reaching not only the state-form and enterprise, but also the own constitution of the social being as an “individual capitalist,” being part of the process of constitution of form-value. Oil, from production to the market, cannot be seen only in a reduced view of its high incomes. Oil must be understood as a social relationship. Oil from the 1980s onwards became one of the central elements of support for the US dollar, therefore, of support for the international monetary system. In addition to this new social role of sustaining the international currency that oil now has, this commodity also incorporates a determined form of social relation through its imposition as an energy source. Therefore, the main purpose of this paper is to show how both financialization and recent developments in the oil market are part of the actual constellation of the forms of capitalist social relations.

The Vatican’s Monetary Wisdom

On Monday, the Vatican released an 18-page document titled «Toward Reforming the International Financial and Monetary Systems in the Context of a Global Public Authority.» Since then, it has been celebrated by advocates of bigger government the world over. What’s ignored is that the document —released to stimulate debate, not offer official doctrine— embraces a sound economic theory concerning the cause of the world financial crisis: the breakdown of the postwar Bretton Woods monetary system and the unleashing of fiat currencies and central-bank printing presses. Let’s look at a representative passage, while keeping in mind several important markers: 1971 was the year that the Nixon administration killed the gold standard, and along with it Bretton Woods and hard currencies; in the early 1980s, financial deregulation in many countries removed the last major barriers to virtually unlimited amounts of credit; and the 1990s was the decade when the drive to suppress interest rates became the common policy of central banks around the world. Since the 1990s, we have seen that money and credit instruments worldwide have grown more rapidly than revenue, even adjusting for current prices. From this came the formation of pockets of excessive liquidity and speculative bubbles which later turned into a series of solvency and confidence crises that have spread and followed one another over the years.

China, the United States, and Central Bank Digital Currencies: How Important Is It to Be First?

In only a few years, central bank digital currencies (CBDC) have gone from a fringe idea promoted by cryptocurrency bloggers to an idea now seriously explored by 80% of the world’s major central banks, including the People’s Bank of China and the United States Federal Reserve. This paper gives an overview of the drive at the world’s central banks to evaluate CBDCs and examines the reasons behind the world’s two leading economies’ stark divergence in central bank digital currency development. China committed much earlier to launching a CBDC, announcing its intention to do so in 2016, and it has since then taken more concrete steps towards piloting and issuing a CBDC than the Federal Reserve, which has yet to commit to ever issuing one. This article then critiques the common framing of CBDC development as a race and explores the implications of China becoming a first mover for both countries and the global monetary system, including the role of the Dollar and RMB internationally. China has already begun retail pilots and is likely to be the first major economy to issue a CBDC to the general public. The analysis hypothesizes that a first mover advantage in CBDC will to be short lived due to the rapid changes in the technology and global marketplace for digital currencies, and that the Federal Reserve may not be as far “behind” China in understanding digital currency as it might appear from their different public response to CBDC.

Ending Bretton Woods: evidence from the Nixon tapes†

AbstractRichard Nixon's August 1971 announcement of a set of policies known collectively as the New Economic Policy (NEP), or the ‘Nixon shock’, effectively terminated the Bretton Woods system (BWS) of fixed exchange rates that had governed the international monetary system since 1944. While there are many accounts of Nixon's decision to end the BWS, the secret Nixon White House tapes provide unique insights into the decision‐making process and Nixon's struggle with this decision. Using the tapes as evidence, we find that Nixon resisted ending the BWS for political reasons and did not fully understand the NEP's strategy, particularly the fact that the domestic policies were designed to provide cover for the international policies. The tapes also clarify that the decision to adopt the NEP was made prior to the Camp David Summit of 13–15 August 1971 in response to general speculative pressure. While the US reacted to pressure on the dollar, Nixon and Treasury Secretary John Connally attempted to appear to be driving decisions for the domestic electorate. The temporary float of exchange rates as part of the NEP inevitably became permanent as a result of Nixon's choice of advisors and his preferences for open capital flows and stimulative monetary policy.

АЛЬТЕРНАТИВНІ КОНЦЕПЦІЇ ПОБУДОВИ ГРОШОВОЇ СИСТЕМИ У ПРАЦЯХ УЧЕНИХ-ЕКОНОМІСТІВ ХХ СТОЛIТТЯ

Після демонетизації золота у державах із ринковою економікою в основі функціонування грошової системи лежать кредитний характер емісії грошей і монополія на неї в центральних банках. Проте упродовж ХХ століття продовжували з’являлися альтернативні концепції побудови та функціонування грошової системи, автори яких висували свої пропозиції щодо оптимального облаштування грошового господарства у державі. Виокремлення основних напрямів, якими, на думку вчених-економістів, повинно здійснюватися реформування грошової сфери, — мета статті.
 Серед найвідоміших економічних шкіл найбільше уваги критиці чинного порядку та необхідності перебудови грошової системи присвятили неокласики. І. Фішер, Л. фон Мізес, М. Ротбард, Ф. фон Гаєк, Х. Уерта де Сото не тільки викривали негативні наслідки інфляції, послідовно доводили злочинний характер фідуціарної емісії, виявляли нелогічність існування банківської системи з частковим резервуванням, а й формулювали власні правила облаштування національних і міжнародних грошових систем. В основу їхніх проєктів покладено золоте забезпечення грошей, організація їхнього випуску на ринкових засадах аж до передання емісії у приватні руки та ліквідації центрального банку. У сучасних умовах це відобразилось у появі криптовалют із приватними емітентами, проте без матеріального забезпечення.
 Представник кейнсіанства Р. Гаррод пропонував замінити золотий стандарт на товарний. Прихильники теорії вільних грошей (С. Гезель і М. Кеннеді) ініціювали введення плати за володіння грошима, що повинно спонукати якнайшвидше їх витратити на придбання товарів чи кредитування. Вітчизяняний учений М. Тимофіїв, що творив на еміграції, розробив проєкт випуску грошових сертифікатів, забезпечених зерном, що зберігається на складах їхніх емітентів, — хліборобських банків, і переконував, що це ті гроші, які ніколи не втратять своєї вартості.
 Таким чином, найбільш популярними альтернативними сучасним концепціями побудови грошової системи є повернення до золотого або будь-якого іншого товарного забезпечення грошової одиниці та можливість емісії приватних грошей.

Stablecoins, Central Bank Digital Currencies and US Dollar Hegemony

Abstract Stablecoins are second generation cryptocurrencies, aimed at maintaining their value stable with respect to official currencies. The most famous example is perhaps represented by libra, the cryptocurrency announced by Facebook in 2019 and yet to be issued; the most widespread is tether, with a market capitalization of almost 10 billion dollars and a daily transaction volume of almost 50 billion dollars, which makes it the most used cryptocurrency. The diffusion of stablecoins is hardly surprising. By minimizing volatility – the main flaw of first generation cryptocurrencies, including bitcoin –, stablecoins are expected to play an even more important role on a global scale within a few years. Our contribution deals not with the economic, but specifically with the geopolitical factors that could foster the use of stablecoins for strategic and military purposes. In particular, we focus on how such payment instruments, together with other alternative electronic payment systems, could be used as a means to circumvent economic sanctions and ultimately as a challenge to the hegemony of the US dollar in the international monetary system.

Факторы интернационализации валют развивающихся стран в постковидной экономике

Over the past three decades, economic transformations and dynamic growth in a number of developing countries have led to a significant increase of their role in the global economy. However, despite the shift in the centre of global economic activity from West to East, the US dollar continues to dominate the international monetary system. The COVID 19 pandemic has disrupted sustainable trade and financial flows, limiting the access of governments and companies in developing countries to international liquidity. The global recession has increased the importance of regional and local factors in the recovery of global economic growth. The current trends in the regionalization of international economic relations, along with the need to finance external debt, create objective prerequisites for a more active use of the currencies of developing countries in the international monetary system. To identify this potential, the authors conducted a comparative analysis of the current positions of developed and developing countries in the world economy and world finance. Internationalization of developing countries› currencies in the international monetary system depends on creation of a number of favourable macroeconomic, institutional and structural conditions. Macroeconomic conditions are: control over the dynamics of nominal per capita income to ensure competitive advantages for exporters; an increase in the share of sovereign debt obligations as a potential reserve asset in the total volume of external debt; improving the performance of the international investment position by increasing the share of high-yield assets of developing countries. Institutional conditions include the internationalization of high-tech companies and the creation of nationally oriented mechanisms and standards for regulating financial markets. The development of existing and creation of new payment and settlement systems based on digital currencies and distributed ledger technology are the main structural conditions for increasing the international competitiveness of the developing countries’ currencies. The authors conclude that only a comprehensive implementation of these conditions will provide a more decentralized nature of the international monetary system in the long term. Acknowledgements. The article was prepared based on the results of studies carried out at the expense of budgetary funds on the state assignment of the Financial University for fundamental research work “Competition of currencies in the international monetary system”.

“Unusual, Unstable, Complicated, Unreliable and Temporary” Reinterpreting the Ebb and Flow of Globalization

In 1919, John Maynard Keynes wrote his famous tract The Economic Consequences of the Peace. In that work, he anticipated the collapse of the first era of globalization that began in the mid-nineteenth century. He admonished the short-sighted assumption that these years of relative peace and prosperity for many was a permanent norm, interrupted only briefly by the Great War. The diplomatic failures, lapses in leadership, and promotion of narrow interests and vision outlined by Keynes underpinned his prediction of a backslash of economic nationalism, trade protectionism, and recession. The paper revisits the turning points in the evolution of the global economic system since 1919 by focusing primarily on the evolution of the international monetary system and policy cooperation/coordination. We identify three disruptions and examine how each prompted a change in the underlying ideology about how the international monetary system should organize: World War I, Bretton Woods, 1970s Great Inflation and Managed Floating. Each turning point was characterized by different forms and institutions of cooperation, how rules (either explicit or implicit) were designed and implemented, and the crucial importance of the historical context.

Uwarunkowania i wyzwania kreacji safe assets – szczególna rola długu publicznego

Przedmiot badań: Aktywa bezpieczne (safe assets) są definiowane na różne sposoby, w zależ­ności od ich atrybutów i funkcji. Najczęściej przyjmuje się, że są to płynne instrumenty finanso­we, głównie dłużne, które gwarantują inwestorom zachowanie wartości w trakcie niekorzystnych zjawisk gospodarczych. Podkreśla się, że dług publiczny ze względu na jego cechy charaktery­styczne, najlepiej może wypełnić tę funkcję. Jednakże, ze względu na oddziaływanie czynników popytowych i podażowych, w gospodarce światowej powstaje problem niedoboru aktywów bez­piecznych. Możliwość uzupełniania podaży jest ograniczona zdolnością głównego globalnego dostawcy aktywów bezpiecznych – USA do zwiększania skali długu publicznego.
 Cel badawczy: Celem artykułu jest odpowiedź na kluczowe pytanie, jak dostarczać gospodarce globalnej wymaganą ilość aktywów bezpiecznych, zachowując stabilność zadłużenia publiczne­go emitentów oraz wymagany poziom bezpieczeństwa. 1
 Metoda badawcza: Artykuł stanowi syntezę studiów teoretycznych podejmowanych w litera­turze światowej i jednocześnie próbę wprowadzenia do polskiej literatury zakresu pojęciowego związanego z aktywami bezpiecznymi. Rozważania teoretyczne opierają się na założeniu, że dług publiczny jest kluczowym czynnikiem determinującym wielkość ich emisji. W konsekwencji, w artykule wyodrębniono zestaw ekonomicznych i pozaekonomicznych czynników kreacji pu­blicznych aktywów bezpiecznych. Na podstawie analizy opisowej wskaźników makroekonomicznych (fiskalnych) podjęto ocenę zdolności emitentów walut rezerwowych, w tym głównie USA, do dostarczania safe assets.
 Wyniki: Wyniki badań pozwalają wyciągnąć trzy kluczowe wnioski. Po pierwsze, w procesach kreacji safe assets, ze względu na ich specyficzne funkcje i atrybuty, dominującą rolę odgrywa sektor publiczny. Z tego powodu głównymi dostawcami safe assets są kraje emitujące waluty rezerwowe, w szczególności USA, ze względu na ich monopolistyczną pozycję w międzynaro­dowym systemie walutowym. Po drugie, potencjał tych krajów do emisji aktywów bezpiecznych jest ograniczony. Świadczą o tym zarówno rozważania teoretyczne (krzywa Laffera dla safe as­sets, dylemat Triffina), jak i rosnące poziomy zadłużenia publicznego. Po trzecie, dla utrzymania globalnej stabilności finansowej, konieczne jest uzupełnienie puli aktywów bezpiecznych. Poten­cjalnie rolę tę mogłyby odgrywać Chiny i UGiW.

What drives gold prices?

A half century after gold ceased to play a significant formal role in the international monetary system, it still captures a great deal of attention in the financial press and the popular imagination. Yet there has been very little scrutiny of the primary factors determining the price of gold since its dollar price was first allowed to vary freely in 1971. In this article, we attempt to fill in that gap by highlighting three considerations that are commonly cited as drivers of gold prices: inflationary expectations, real interest rates, and pessimism ]about future macroeconomic conditions.

СУЧАСНИЙ СТАН ФУНКЦІОНУВАННЯ НАЦІОНАЛЬНИХ ПЛАТІЖНИХ СИСТЕМ

The article presents the theoretical aspects of the payment system, clarifies the definition of the national payment system of a complex and interconnected set of payment and technical elements, each of which contributes to the efficient functioning of both the financial sector and the national economy as a whole. The classification features according to which payment systems are classified are generalized and their types are given. The main tasks of payment systems functioning are outlined. The components of the payment system of Ukraine are considered. It is proved that the non-cash payment system is designed to minimize the cost of issuing cash and reduce the cost of its maintenance, collection, and recalculation. It is highlighted that the main purpose of creating payment systems is to reduce the cash supply. The modern basic requirements to payment systems are defined. The current payment systems in Ukraine are analyzed, among which: the national electronic payment system (EPS), created by the National Bank of Ukraine, the National Payment System “Ukrainian Payment Space”, 10 intrabank payment systems, 2 money transfer systems, 11 money transfer systems, 1 system settlements and 1 card system created by non-banking institutions, as well as 8 money transfer systems and 4 card payment systems created by non-residents, as well as international payment systems, which include 5 money transfer systems created by Ukrainian banks and 4 money transfer systems created by non-banking institutions . The current state of operations of Ukrainian banks with electronic money is studied. The basic requirements for national payment systems are given. Measures to increase the level of security of the national payment system of Ukraine are outlined. Recommendations for the development of the electronic payment system of Ukraine are presented. Special attention needs to be paid to the development of the national payment system of Ukraine, which depends on the effectively implemented innovations, which consist in the application and expansion of non-cash forms of payment and guarantee of the electronic payment system.

The Significance of the Exchange Rates: A Survey of the Literature

Since the collapse of the Bretton Woods in the late 1970’s, the international monetary system has been dominated by the floating exchange rate system. The currencies around the world are mainly determined by the laws of the supply and demand. International trade has been the engine of growth and the cause of stability in many countries. International trade flows have increased extremely over the last three decades. The reduction of trade and policy barriers have contributed in the rise of global trade, but the interesting question is if the exchange rates play any role in international economic relations. An important aspect of the relationship between the exchange rates and the international economic relations is the intensity of the effect. To examine the intensity of this relation, we must mention the connection among exchange rates with the economy and trade. Due to the fact every country—developed or developing—targets economic growth, the investigation of the relationship of the exchange rate with the economy is important. Moreover, the exchange rate affects the trade volume and the current account, so the exploration of the exchange rate with the trade performance is necessary. The aim of this paper is to survey the economic literature on the relationship between exchange rates and global economic relations.

Promissory note as a tool to combat the shortage of foreign currency liquidity and a measure of integration within the framework of regional international monetary and financial systems

Promissory note as a tool to combat the shortage of foreign currency liquidity and a measure of integration within the framework of regional international monetary and financial systems

Кризис бреттон-вудской валютной системы и начало европейского валютного сотрудничества

The article aims to identify the impact of the crisis of the Bretton Woods monetary system on the beginning of European monetary cooperation. Russian scholars' publications on European monetary integration usually examine in detail the internal prerequisites for the emergence of the Werner Plan and only sketch the external environment. Drawing on available European and American sources, this research provides a more nuanced picture of the origins of European monetary cooperation in the context of a general collapse of the post-war international monetary order. The article begins with the characteristic of the main features of the Bretton Woods monetary system. In the late 1960s and early 1970s, the intrinsic contradictions of the Bretton Woods mechanism, such as the problem of liquidity, confidence in the key currencies, and the adjustment mechanism, generated numerous monetary crises. All efforts to reform the international monetary system stalled because of disagreements between countries with surplus and deficit payment balances. The research also focuses on the US monetary policy. As the US dollar was the main reserve currency, the stability of the entire monetary system depended on its position. Since the late 1960s, conflicts over monetary issues developed between the United States and Western European countries, culminating in the Nixon administration's unilateral decision to abolish the gold standard in August 1971. Monetary crises and the weakness of the dollar pushed the countries of the European Economic Community to develop their own currency grouping. The article analyses the Werner Plan of 1970 that proposed the creation of an Economic and Monetary Union (EMU) with a single European currency as the ultimate goal. Based on fixed exchange rates between European currencies, the EMU represented a regional replica of the Bretton Woods system. The single European currency was seen by Europeans as an alternative to the dollar and the unpredictable American policy. The author concludes that the end of transatlantic monetary cooperation gave an additional impetus to the development of European monetary integration. Although first European efforts to create the EMU had failed because of the different approaches of France and the Federal Republic of Germany as well as the economic crisis of the early 1970s, the Werner Plan marked a crucial phase in the history of European integration. The Werner Report became a blueprint for the European Monetary System (EMS) of the late 1970s. The success of the EMS paved the way for the creation of the European Monetary Union envisaged in the Maastricht Treaty of 1991 establishing the European Union and the adoption of a single European currency - the euro.