This paper analyzes problems of international money. The paper highlights that there are three chief economic evils—starvation and poverty in the Third World, unemployment in industrial countries, and price inflation in the industrial countries that has been so fast as to be socially unacceptable at home and to complicate immensely social and economic adjustment in much of the rest of the world. The paper examines structural change and financial innovation in the international monetary system since 1972. It also analyzes exchange rate management and surveillance since 1972.


Edited by Michael Posner

Papers presented at a seminar organized by the International Monetary Fund and the Overseas Development Institute in London in March 1985



Library of Congress Cataloging-in-Publication Data

Problems of international money, 1972–85.

Includes bibliographies.

1. International finance. I. Posner, Michael, 1931- II. International Monetary Fund. III. Overseas Development Institute (London, England) HG3881.P77 1986 332’.042 86-10480

ISBN 9780939934584

ISBN 0-939934-58-2 (paper)

© 1986 by the International Monetary Fund


Washington, D.C. 20431


The role of the International Monetary Fund as a central institution of the international monetary system has taken on new dimensions in the past few years. The traditional business of the Fund as a financial institution has been to help the authorities in member countries adjust to variations in trade and payments flows that generate temporary imbalances. Historically, action to rectify the imbalances has been essentially in the official domain. But the debt problem of developing countries has created a new element by injecting private participants in the financial system as prime movers. The Fund’s judgments have become important to private financial intermediaries and their responses have often been crucial to the success of the Fund-supported programs in borrowing countries. There is potential here for partnership as well as for tension.

The papers in this volume were presented at a seminar that was held in March 1985 near London under the auspices of the Overseas Development Institute and the Fund. The seminar drew participants from academia, private banking circles, and non-official groups in developing countries under the perceptive guidance of Michael Posner, the editor of this volume, to whom special thanks are due. Although the papers reflect the personal views of the authors, they indicate a widespread convergence on many major topics and a broad agreement that solutions will be found by working within the present arrangements while seeking to improve them. Developments since the seminar may put a different gloss on some of the questions, but the broad issues addressed remain valid and the discussions have relevance despite the passage of time.

J. de Larosière

Managing Director

International Monetary Fund


The thanks of the Editor and the contributors are due to the International Monetary Fund and to the Overseas Development Institute, and in particular to Azizali Mohammed from the Fund and Tony Killick and Patricia Scotland from the ODI, who personally did so much to make the seminar on which this book was based a success. The participants in the seminar certainly helped me to clear my mind, and my own paper reflects what I learned in Windsor Great Park. Joslin Landell-Mills and her colleagues from the External Relations Department of the Fund provided their usual light but firm and expert touch in overseeing the process from author’s draft to published book.

M.V. Posner



  • 1 Michael Posner

    • Introduction

  • 2 David T. Llewellyn

    • The International Monetary System Since 1972: Structural Change and Financial Innovation

    • Susan Strange

    • Comment

  • 3 G.G. Johnson

    • Exchange Rate Management and Surveillance Since 1972

    • LD.D. Price

    • Comment

  • 4 Tony Killick

    • Balance of Payments Adjustment and Developing Countries: Some Outstanding Issues

    • Stanley Please

    • Comment

  • 5 Michael P. Dooley

    • The Role of Reserves in the International Monetary System

    • Willem H. Buiter

    • Comment

  • 6 Azizali F. Mohammed David Lomax Ernesto Zedillo Ponce de Leon

    • The Debt Problem

  • 7 Stephany Griffith-Jones

    • The Role and Resources of the Fund

    • Marjorie Deane

    • Comment

  • 8 Loukas Tsoukalis

    • International Monetary Arrangements and Future Adaptation

    • M. Narasimham

    • Comment

    • Appendix

    • List of participants