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The future of the international exchange rate system

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  • Schäfer, Wolf

Abstract

The revival of a multilateral exchange rate system (ERS) with one single anchor currency and binding global rules for national exchange rate management is not a viable or realistic option. It is more realistic that the present 3-polar ERS in the medium term could dynamically enlarge to a 4-polar - in the long run even to a multipolar - system especially when taking China into account. In this view, the global ERS is likely to be extensively characterized by a small number of competing anchor currencies (currency oligopoly) which float vis-à-vis each other and to which pegs and managed floats are attached (satellite currencies). Globalisation contradicts international monopolies including monopoly currencies. Globalisation stimulates international competition including anchor currency competition. This paper underlines that this is why there is no way back to Bretton Woods or to any similar system based on only one single world anchor currency.

Suggested Citation

  • Schäfer, Wolf, 2010. "The future of the international exchange rate system," Discussion Papers 3/10, Europa-Kolleg Hamburg, Institute for European Integration.
    • Handle: RePEc:zbw:ekhdps:310
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    References listed on IDEAS

    as
    1. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, April.
    2. Michael Bordo & Barry Eichengreen, 2013. "Bretton Woods and the Great Inflation," NBER Chapters, in: The Great Inflation: The Rebirth of Modern Central Banking, pages 449-489, National Bureau of Economic Research, Inc.
    3. Torben Andersen & Julia Chiriaeva, 2007. "Exchange Rate Pegs, Fiscal Policy and Credibility," Open Economies Review, Springer, vol. 18(1), pages 53-76, February.
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    More about this item

    Keywords

    exchange rate systems; Bretton Woods; anchor currency; currency competition; globalisation;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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