International Monies, Special Drawing Rights, and Supernational Money

26 Pages Posted: 7 Jul 2009

See all articles by Pietro Alessandrini

Pietro Alessandrini

UniversitĂ  Politecnica delle Marche - Faculty of Economics

Michele U. Fratianni

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy; Universita' Politecnica delle Marche

Date Written: July 3, 2009

Abstract

The current international monetary system (IMS) is fragile because the dollar standard is rapidly deteriorating. The dual role the dollar as the dominant international money and national money cannot be easily reconciled because the US monetary authorities face a conflict between pursuing domestic objectives of employment and inflation and maintaining the international public good of a stable money. To strengthen the IMS, China has advocated the revitalization of the Special Drawing Rights (SDRs). But SDRs are neither money nor a claim on any international institution; are issued exogenously without any consideration to countries’ financing needs; and can activate international monies only though bilateral transactions. The historical record of SDRs as international reserves is altogether unimpressive. We propose instead the creation of a supernational bank money (SBM) within the institutional setting of a clearing union. This union would be a full-fledged agreement by participating central banks on specific rules of the game, such as size and duration of overdrafts, designation of countries that would have to bear the burden of external adjustment, and coordination of monetary policies objectives and at expense of the maintenance of the international public good. We also discuss structural changes that would make SDRs converge to SBMs.

Keywords: international money, international monetary system, Special Drawing Right, supernational bank money

JEL Classification: E42, E52, F33, F36

Suggested Citation

Alessandrini, Pietro and Fratianni, Michele, International Monies, Special Drawing Rights, and Supernational Money (July 3, 2009). Available at SSRN: https://ssrn.com/abstract=1429482 or http://dx.doi.org/10.2139/ssrn.1429482

Pietro Alessandrini

UniversitĂ  Politecnica delle Marche - Faculty of Economics ( email )

Piazzale Martelli, 8
60121 Ancona
Italy

Michele Fratianni (Contact Author)

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States
812-855-3360 (Phone)
812-855-3354 (Fax)

Universita' Politecnica delle Marche ( email )

Piazzale Martelli, 8
60121 Ancona
Italy
39-071-2207120 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
311
Abstract Views
1,193
rank
95,318
PlumX Metrics