A single currency: utopia today? Reality tomorrow?

Abstract

The collapse of the Bretton Woods international monetary system in 1971 inaugurated an era of highly fluctuating exchange rates. Part of the reason for this volatility has been the almost complete internationalisation of capital markets, with national currencies remaining subject to political influences and the vagaries of changing trade patterns. One possible solution to these problems would be the adoption of a single international currency unit. Although this would not remove the problem inherent in balance of payments disequilibrium, it would nevertheless impose greater market discipline on financial policies by removing the option of monetary adjustments. JEL: F31, E42

Keywords

• Fluctuating exchange rates
• single international currency unit
• financial policies
• monetary adjustments