A Stable International Monetary System Emerges: Bretton Woods, Reversed

35 Pages Posted: 14 Dec 2006

See all articles by Andrew Kenan Rose

Andrew Kenan Rose

University of California - Haas School of Business; NUS Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: September 2006

Abstract

A stable international monetary system has emerged since the early 1990s. A large number of industrial and a growing number of developing countries now have domestic inflation targets administered by independent and transparent central banks. These countries place few restrictions on capital mobility and allow their exchange rates to float. The domestic focus of monetary policy in these countries does not have any obvious international cost. Inflation targeters have lower exchange rate volatility and less frequent "sudden stops" of capital flows than similar countries that do not target inflation. Inflation targeting countries also do not have current accounts or international reserves that look different from other countries. This system was not planned and does not rely on international coordination. There is no role for a center country, the IMF, or gold. It is durable; in contrast to other monetary regimes, no country has yet abandoned an inflation-targeting regime in crisis. Succinctly, it is the diametric opposite of the post-war system; Bretton Woods, reversed.

Keywords: Fixed, inflation, exchange, rate, capital, controls, finance, durable, regime

JEL Classification: F02, F10, F34

Suggested Citation

Rose, Andrew Kenan and Rose, Andrew Kenan, A Stable International Monetary System Emerges: Bretton Woods, Reversed (September 2006). CEPR Discussion Paper No. 5854, Available at SSRN: https://ssrn.com/abstract=951802

Andrew Kenan Rose (Contact Author)

University of California - Haas School of Business ( email )

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HOME PAGE: http://faculty.haas.berkeley.edu/arose

NUS Business School ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

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