Cooperation, Conflict, and Crisis in the Contemporary International Monetary System

Any current-account imbalances that emerged would be eliminated automatically through these exchange-rate movements. No longer would governments be forced to alter their macroeconomic policies to eliminate payment imbalances. This chapter examines how politics generates these imbalances, and how these imbalances drive the politics of cooperation and conflict in the contemporary international monetary system. It looks at the two episodes that have occurred within the broader international monetary system. The first unfolds during the 1980s, while the second begins in the late 1990s and ends with the great financial crisis of 2007–2009. The chapter focuses on monetary cooperation and conflict in the European Union, tracing how disputes over distribution of the costs of exchange-rate stability have shaped the evolution of this regional monetary system. The Savings-Investment framework builds on and refines this basic relationship to suggest that the current account is equal to the difference between national savings and national investment.

Economics · Keynesian economics · Political economy · Political science · Global Financial Crisis and Policies