A New-Style Theory of Dual Currency Area & International Public Currency: The Generalization of the Theory of OCA

Abstract

Based on the “natural dual features” of world economy, we generalize the theory of OCA through redesigning and rejoining the fully independent affairs of national currencies and construct a new-style theory of dual currency area and international public currency. Firstly, we build an international public currency and “compound” exchange rate regime to provide a really stable monetary anchor for each national currency. Secondly, we set a “fully symmetrical” quota allocation and adjustment rule to international public currency with the neutral influence to generate net deficits or surpluses for each member country. Thirdly, we create a quota-based currency swap mechanism with “unlimited responsibility” for each national central bank that can provide a full issuance preparation for the supranational international public currency, namely full “hard” group insurance from all national currencies. Therefore, we originally provide a consolidated theoretical foundation to successfully create the supranational Asiancurrency, BRIICcurrency, or Globalcurrency, etc., which fully can “harmoniously coexist” with all different national currencies. And accordingly, we finally break a feasible brand-new path to thoroughly reform the current international monetary system and strengthen the future basket of international currencies, including IMF to allocate SDR or ECB to issue Euro, during this perplexed “after-crisis era”.

Keywords: international monetary system, dual currency area, international public currency, 'compound' exchange rate regime, optimum currency area

JEL Classification: E42, E58, F33, F55