The International Monetary System: Living with Asymmetry

61 Pages Posted: 3 Dec 2011 Last revised: 11 Nov 2013

See all articles by Maurice Obstfeld

Maurice Obstfeld

University of California, Berkeley; Peterson Institute for International Economics; National Bureau of Economic Research; Centre for Economic Policy Research

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Date Written: December 2011

Abstract

This paper analyzes current stresses in the two key areas that concerned the architects of the original Bretton Woods system: international liquidity and exchange rate management. Despite radical changes since World War II in the market context for liquidity and exchange rate concerns, they remain central to discussions of international macroeconomic policy coordination. To take two prominent examples of specific (and related) coordination problems, liquidity issues are paramount in strategies of national self-insurance through foreign reserve accumulation, while recent attempts by emerging market economies (EMEs) to limit real currency appreciation have relied heavily on nominal exchange rate management. A central message is that a diverse set of potential asymmetries among sovereign member states provides fertile ground for a variety of coordination failures. The paper goes on to discuss institutions and policies that might mitigate some of these inefficiencies.

Suggested Citation

Obstfeld, Maurice, The International Monetary System: Living with Asymmetry (December 2011). NBER Working Paper No. w17641. Available at SSRN: https://ssrn.com/abstract=1967375

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