Abstract

In addition to the shift from a pegged to a mixed exchange rate system, two other key structural changes in the international economy since the collapse of the Bretton Woods system have been the rapid expansion of private international financial markets and the removal of capital account restrictions in the industrial countries.24 These changes in international financial markets have been reflected in the growing commitment by many countries to current and capital account convertibility, the sharp expansion in the scale of net and gross capital flows in the major industrial countries, the globalization and integration of offshore and major domestic markets, the dominant role of private flows in the financing of fiscal and current account imbalances, the growing importance of institutional investors in cross-border securities transactions, and the sharp increase in the use of derivative financial instruments. This section first reviews the principal structural changes in international financial markets and then briefly considers some policy implications of these structural changes.

In addition to the shift from a pegged to a mixed exchange rate system, two other key structural changes in the international economy since the collapse of the Bretton Woods system have been the rapid expansion of private international financial markets and the removal of capital account restrictions in the industrial countries.24 These changes in international financial markets have been reflected in the growing commitment by many countries to current and capital account convertibility, the sharp expansion in the scale of net and gross capital flows in the major industrial countries, the globalization and integration of offshore and major domestic markets, the dominant role of private flows in the financing of fiscal and current account imbalances, the growing importance of institutional investors in cross-border securities transactions, and the sharp increase in the use of derivative financial instruments. This section first reviews the principal structural changes in international financial markets and then briefly considers some policy implications of these structural changes.

Structural Changes in International Financial Markets

The growth of private international financial markets has been accompanied by an ongoing expansion of current and capital account convertibility. In 1975, only about one third of all IMF members had accepted the obligations of Article VIII to allow current account convertibility, whereas by June 1994 over one half had done so, even as IMF membership was growing from 128 to 178 countries. Progress toward capital account convertibility has been more limited, with most members having imposed some restrictions on capital account transactions throughout the postwar period.25 However, there has recently been a move to capital account liberalization in the industrial countries and some developing countries, as evidenced by the rise in the number of countries without capital account restrictions from 23 in 1975 to 38 in 1993.26 This development is in part a manifestation of the erosion of the effectiveness of capital controls in many countries.

Capital account convertibility in the industrial countries has facilitated a sharp expansion in the scale of net and gross capital flows between these countries, as well as increased participation by foreign investors and foreign financial institutions in major domestic financial markets. A sharp upswing in the level of net capital flows among the industrial countries was the counterpart of the historically large current account imbalances during the period. Although large current account imbalances were evident during 1973–75 and in 1979–80, net capital flows between the industrial countries expanded most rapidly after 1982. For example, the net capital inflow into the United States rose from an average of $2 billion a year (0.1 percent of GNP) in 1970–72 to an average of $139 billion a year (3 percent of GNP) in 1985–88 before subsiding to $65 billion a year (1¼ percent of GNP) in the early 1990s.

An even more rapid expansion occurred in gross capital flows, reflecting increased cross-border banking transactions and flows of securities, the development of offshore (Eurocurrency) markets, and the entry of foreign financial institutions into domestic markets. For example, the stock of international loans (net of redepositing by banks) rose from $175 billion at the end of December 1973 (5 percent of industrial countries’ GNP) to $3.6 trillion at the end of 1993 (19 percent of the industrial countries’ GNP).

These international capital flows were associated with a sharply increased volume of transactions in both spot and derivative foreign exchange markets. Turnover on the three largest spot foreign exchange markets (London, New York, and Tokyo) increased threefold between 1986 and 1992, with global turnover in April 1992 estimated to be about $880 billion daily. By way of comparison, total non-gold foreign exchange reserves of the industrial countries’ central banks amounted to roughly $414 billion at the end of 1993.

The presence of foreign investors in major domestic financial markets also increased as the need to finance large fiscal and current account imbalances in the industrial countries created incentives for removing restrictions on domestic and external financial transactions. While data on the residency of holders of industrial countries’ bonds are notoriously poor, the share of public debt of the major industrial countries held by nonresidents exceeded 20 percent in 1993 and appears to be rising. In Germany, for example, central government debt held by foreigners increased from 5 percent at the end of 1974 to 39 percent at the end of 1992.

More generally, while private capital flows played only a limited role in financing fiscal and current account imbalances in the 1950s and 1960s, these flows provided most of the cross-border financing of the imbalances for industrial countries throughout the period since 1970, and for developing countries in the 1970s.27 The ability of international financial markets to respond to the financing needs associated with adjustments to unanticipated shocks was demonstrated in the early 1990s following the reunification of Germany. In the three years prior to German reunification, Germany was a net exporter of capital to the rest of the world, with a current account surplus of about $50 billion per annum. Following the reunification, the German current account balance switched to deficits of $20 billion in 1991, $26 billion in 1992, and $22 billion in 1993. Although Germany’s foreign direct investment abroad declined, the current account deficit was financed principally by sharp increases in inflows of portfolio investment and to the banking sector.

Although many developing countries lost access to international financial markets during the 1980s, the renewed access of developing countries to these markets has been evident in the sharp increase in capital flows to developing countries in the early 1990s. Between 1990 and 1993, net private capital flows to developing countries are estimated to have risen from $43 billion to $113 billion, and, in 1992–93, these flows were larger than official flows for the first time in a decade.28 Since the 1970s, the source of these flows has shifted from banks to nonbanks in the form of bonds, equity portfolio investment, and foreign direct investment; meanwhile, inflows have shifted from predominantly sovereign to mainly private borrowers, with flows between private market participants now accounting for almost 60 percent of the net flows. However, most of these inflows were to middle-income countries that had either avoided commercial bank debt-servicing difficulties in the 1980s or successfully resolved such earlier problems. Apart from China and India, most low-income countries have not participated in these inflows, and they continue to rely heavily on official financing.

Another aspect of the structural changes in international financial markets has been the growing importance of institutional investors in cross-border capital flows, especially in securities transactions. In the early 1970s, large institutional investors, such as pension funds, insurance companies, and mutual funds, played only a limited role in cross-border capital flows, owing to both official restrictions and the high costs of acquiring and managing diversified international portfolios. In the 1980s, however, the role of institutional investors in channeling funds between savers and investors increased, reflecting the lower transactions costs for institutional investors relative to individual investors, the increased willingness of individual savers to allow their portfolios to be managed by agents, and, in some countries, the tax advantages enjoyed by contractual savings plans.

The asset price variability that characterized international financial markets in the 1980s and early 1990s has also stimulated the use of a variety of over the-counter and exchange-traded derivative instruments (mainly futures, options, and swaps). For example, at the end of 1992, the principal value of outstanding interest rate and currency swaps was $5.6 trillion, five times the value at the end of 1987. More generally, the principal amount of exchange-traded derivative instruments increased by 69 percent in 1993, reaching $7.8 trillion, which was more than 12 times the total in 1986.29

Policy Implications of Structural Changes in International Financial Markets

The expansion of international financial markets and the movement toward current and capital account convertibility have influenced the distribution of global savings and investment, the formulation and disciplining of macroeconomic policies, the coordination of supervisory and regulatory policies, and the structure of the international reserve system.

The structural changes that have occurred in international capital markets since the collapse of the Bretton Woods system have clearly increased the international linkages between major domestic and offshore financial markets, particularly in the industrial countries. The capital markets of developing countries are also becoming more closely integrated with markets in the rest of the world, although they have progressed far less in that direction than industrial countries. It is still premature to speak of a single, global capital market where most of the world’s savings are auctioned to the highest bidder and where a wide range of assets carry the same risk-adjusted return. However, access to international financial markets has become an increasingly important determinant of the share of global savings that is likely to accrue to a particular country.

Experience since the debt crisis has demonstrated that creditworthiness considerations play a dominant role in determining both the cost and availability of credit from international financial markets. While there is considerable debate about how well the markets evaluate the willingness and the ability of borrowers to service their debt obligations, it is clear that the perception that a borrower’s creditworthiness has deteriorated or is about to deteriorate can lead to an abrupt curtailment of funding, which may be difficult—even in the medium term—to reverse. The evaluation of a country’s creditworthiness is done on a continuing basis and is influenced by the market participants’ perception of the quality of a country’s macroeconomic and financial policies. Creditworthiness is evaluated most explicitly by credit-rating agencies, which characterize the investment quality of a country’s external debt.

These tighter connections between access to major domestic and offshore financial markets and the market’s evaluation of a country’s policies have reduced in some respects the authorities’ autonomy in conducting macroeconomic policies. It has become difficult to resist private markets when they have reached the concerted view that the outlook for a particular security or currency has changed. Thus, perceptions that a country is following weak or inconsistent policies can have an immediate impact on not only its cost of funds and access to international credit but also its ability to sustain a particular exchange rate or monetary policy.

With the benefit of hindsight, it is not difficult to identify instances over the past two decades when participants in international capital markets may not have paid enough attention to the economic fundamentals. The buildup to the external debt crisis in the 1970s, the run-up of the U.S. dollar in 1984–85, and the large shift of funds into EMS countries with higher interest rates in the late 1980s provide some examples.30 Nonetheless, it is difficult to conclude that private capital markets usually “got it wrong” in deciding which securities and currencies were worth-while investments and which ones were not. If there is a problem with the operation of international capital markets, it is often that the verdict of the marketplace comes late in the day, and then with a vengeance. For all concerned, it would be better if the adjustment to changing perceptions regarding economic prospects occurred earlier and in a more orderly and consistent manner.

As for the implications for the exchange rate regime of this increased market discipline, it would be too extreme to assert that the growth and agility of private financial markets now make it unrealistic to operate fixed exchange rate arrangements. Nonetheless, the growth of these markets has made the conditions for maintaining a fixed exchange rate system more demanding. In particular, there is now less room for divergence of views among participants about the appropriate stance and medium-term orientation of monetary policy, less time to adjust to large, country-specific shocks, and greater pressure to achieve closer convergence of economic performance. Nonetheless, some countries will find that it is in their interest to participate in fixed exchange rate arrangements, and that they can credibly commit to those requirements.

The growing influence of private markets on the sustainability of macroeconomic policies provides a case for trying to improve the consistency and effectiveness of market discipline. Two considerations seem particularly important. First, market participants must have a full understanding of a debtor’s obligations if they are to accurately assess its debt-servicing obligations and capacity. The more limited that information, the more likely it is that “contagion effects” will be present, as it could prove difficult to distinguish better credit risks from weaker ones. Better disclosure requirements and harmonization of accounting standards across countries would be particularly helpful. Second, the discipline exercised by the market will be weakened if the participants believe that the borrower will be bailed out in the event of an actual or impending default. If such a perception exists, the interest rate paid by the borrower will reflect the creditworthiness of the perceived guarantor, and there will be little incentive for either the borrower to curb its activities, or the lender to monitor the borrower’s activities. However, it may be very difficult to make a “no-bailout” pledge credible, especially if it is perceived that there would be large systemic repercussions associated with a particular failure.

While financial innovations and the ongoing internationalization of financial activities have been sources of major efficiency gains, they also have exposed gaps in supervisory and regulatory regimes and put new pressures on payments, clearance, and settlement systems. In the foreign exchange markets, for example, such gaps were first evident in 1974 when the failure of Bankhaus Herstatt and Franklin National Bank indicated the scale of losses that could be associated with open positions in foreign exchange markets and settlement failures.

To reduce the systemic risk that large institutional failures in one market can immediately have on institutions in a broad range of other markets, there has been a concerted effort over the past two decades to improve the international coordination of supervisory and regulatory policies.31 These efforts have focused on coordinating on an international level the strengthening of the capital base of banks and securities firms; assigning supervisory responsibility for the foreign branches and subsidiaries of banks and securities houses; harmonizing reporting and disclosure requirements; and developing measures to strengthen major payments, clearance, and settlement systems. These efforts have resulted in the development of risk-weighted capital-adequacy standards for international banks by the Basle Committee on Banking Supervision and the Basle Concordat of 1975, which assigned responsibility for the supervision of foreign branches, subsidiaries, and joint ventures.32 In addition, the Committee has also generated discussions of minimum capital-adequacy standards for securities firms within the context of the Technical Committee of the International Organization of Securities Commissions, of improvements in interbank netting arrangements in offshore payments systems, and of the harmonization of clearance and settlement arrangements in industrial countries and some developing countries.

Despite the shift to more flexible exchange rates following the collapse of the Bretton Woods system, countries have continued to increase their holdings of international reserves. Reserves are held as a precaution against unanticipated shocks, for foreign exchange market intervention, and as a means of demonstrating creditworthiness. As private international financial markets have expanded, many countries have acquired reserves by borrowing on international markets. For countries without access to capital markets, reserves have had to be obtained by improving their current account position, which has required a compression of domestic demand relative to production in order to reduce net imports. While a loss of market access has often reflected unsound macroeconomic policies, the restoration of such access can take considerable time, even following the implementation of stabilization programs.

For countries with access to international financial markets, borrowed reserves have provided a flexible and efficient means of adjusting their gross reserve positions. However, the net cost of holding borrowed reserves—the excess of the cost of borrowed funds over the return earned on reserve assets—is significant for all but the major reserve-currency countries, and the cost is particularly large for many of the poorer countries in the world. While this risk premium may be appropriate in many circumstances, it is not clear that it is justified in cases in which reserves are not drawn down permanently but are held in order to provide short-term macroeconomic flexibility for the countries concerned. Nonetheless, many countries have generally considered it desirable to incur the carrying costs of reserves rather than rely on their ability to obtain credit during periods of need, partly because this access to financial markets is often restricted at the very time when they need foreign financing. However, many developing countries and countries in transition have very low levels of reserves relative to plausible standards of reserve needs.

These changes in access to financial markets and the cost of foreign funds highlight some potential disadvantages of a reserve system heavily dependent on borrowed reserves. In part, the potential role of the SDR in meeting the long-term global need for supplementing reserves depends upon whether international financial markets are likely to be an efficient and reliable source of borrowed reserves over time.33 In this connection, it is argued that SDR allocations could reduce the vulnerability of the reserve system to disturbances in financial markets by providing countries with sufficient stocks of owned reserves that would be available during a crisis. Furthermore, because the costs of increasing reserve holdings through borrowing or net import compression are, for most countries, significantly higher than the true economic opportunity cost to the world of creating additional reserves through SDR allocation, there could be other advantages to a reserve system that relied more heavily on the SDR.34 More generally, it can be argued that there is presently evidence of a long-term global need for reserve supplementation and that, given such a global need, the objectives specified in the Article of Agreement provide a plausible case for allocating a moderate amount of SDRs.

Other considerations, however, can be cited as indicating that there may not be a long-term global need for supplementing reserves in the form of SDRs. First, it would appear that many of the countries that account for the bulk of world trade are not facing difficulties in satisfying their growing demand for reserve assets. Indeed, the rising ratio of non-gold reserves to imports in many developing countries can be interpreted as indicating that the reserve-creation mechanism is not acting abnormally. Finally, the low reserves of many developing countries may, in fact, reflect inadequate or inappropriate macroeconomic and financial policies. In these countries, there is a need for policy adjustments supported by conditional lending, and unconditional reserves provided by an SDR allocation might well be spent, resulting in a permanent transfer of resources.

24

The former development has been described at length in Goldstein, Folkerts-Landau, and others (1993b).

25

While the Articles of Agreement encourage the establishment of current account convertibility (Article VIII status), they also permit the use of capital controls. Article VI, Section 3, states: “Members may exercise such controls as are necessary to regulate international capital movements, but no member may exercise these controls in a manner which will restrict payments for current transactions or which will unduly delay transfers of funds and settlement of commitments, except as provided in Article VII, Section 3(b) and in Article XIV, Section 2.”

26

Alesina, Grilli, and Milesi-Ferretti (1994) discuss the determinants and economic impact of capital controls. This development is in part a manifestation of the erosion of the effectiveness of capital controls in many countries.

27

For example, when the United States ran a cumulative current account deficit of $664 billion between 1983 and 1988, inflows of portfolio investment, other private short-term capital, and net foreign direct investment financed about 75 percent of the external deficit.

28

This net capital flow includes net bonds issued on international capital markets, commercial bank lending, foreign direct investment, other private flows, and portfolio equity flows.

29

A more detailed discussion of derivative markets can be found in Goldstein, Folkerts-Landau, and others (1993b).

30

For a description of this last development, see Chapter III, “Prologue to the ERM Crisis: ‘Convergence Play’,” in Goldstein, Folkerts-Landau, and others (1993a).

31

The general nature of the systemic risks in international financial markets has been addressed more fully in Goldstein, Folkerts-Landau, and others (1994).

32

The Concordat was subsequently revised in 1978, 1983, and 1990 to provide for a consolidated supervision, inclusive of foreign branches and subsidiaries, of banks’ capital adequacy and the supervision of banks’ holding companies, and to improve the flow of information among supervisors. The problems associated with the implementation of the Concordat are discussed in El-Erian (1992).

33

For a more extensive discussion of the role of the SDR in the international monetary system, see International Monetary Fund (1987). For an analysis of why the SDR has so far not played a key role in the international monetary system, see Rhomberg (1991).

  • Adams, Charles, Paul R. Fenton, and Flemming Larsen, Potential Output in Major Industrial Countries,” in Staff Studies for the World Economic Outlook, World Economic and Financial Surveys (Washington: International Monetary Fund, August 1987).

    • Search Google Scholar
    • Export Citation
  • Aghevli, Bijan B., Mohsin S. Khan, and Peter J. Montiel, Exchange Rate Policy in Developing Countries: Some Analytical Issues, IMF Occasional Paper No. 78 (Washington: International Monetary Fund, March 1991).

    • Search Google Scholar
    • Export Citation
  • Aizenman, Joshua, Exchange Rate Flexibility, Volatility, and Domestic and Foreign Direct Investment,” Staff Papers, International Monetary Fund, Vol. 39 (December 1992), pp. 890922.

    • Search Google Scholar
    • Export Citation
  • Alesina, A., V. Grilli, and G.M. Milesi-Ferreti, The Political Economy of Capital Controls,” in Capital Mobility: The Impact on Consumption, Investment, and Growth, ed. by L. Leiderman and A. Razin (Cambridge, England: Cambridge University Press, 1994).

    • Search Google Scholar
    • Export Citation
  • Barrell, Ray, and Simon Wren-Lewis, Fundamental Equilibrium Exchange Rates for the G7,” CEPR Discussion Paper No. 323 (London: Center for Economic Policy Research, June 1989).

    • Search Google Scholar
    • Export Citation
  • Bayoumi, Tamim, One Money or Many: On Analyzing the Prospects for Monetary Unification in Various Parts of the World, Essays in International Finance, No. 76, Princeton University (Princeton, New Jersey: Princeton University Press, 1994).

    • Search Google Scholar
    • Export Citation
  • Bayoumi, Tamim, and Barry Eichengreen, Macroeconomic Adjustment Under Bretton Woods and the Post-Bretton Woods Float: An Impulse Response Analysis,” Economic Journal, Vol. 104 (July 1994), pp. 81327.

    • Search Google Scholar
    • Export Citation
  • Bordo, Michael D., The Bretton Woods International Monetary System: An Historical Overview,” in A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, ed. by Michael D. Bordo and Barry Eichengreen (Chicago and London: University of Chicago Press, 1993).

    • Search Google Scholar
    • Export Citation
  • Bordo, Michael D., and Barry Eichengreen, eds., A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform (Chicago and London: University of Chicago Press, 1993).

    • Search Google Scholar
    • Export Citation
  • Bruno, Michael, Crisis, Stabilization and Economic Reform (Oxford: Clarendon Press, 1993).

  • Bryant, Ralph C., and others, eds., Macroeconomic Policies in an Interdependent World (Washington: Brookings Institution, 1989).

  • Bryant, Ralph C., Peter Hooper, and Catherine L. Mann, eds., Evaluating Policy Regimes: New Research in Empirical Macroeconomics (Washington: Brookings Institution, 1993).

    • Search Google Scholar
    • Export Citation
  • Calvo, Guillermo A., and Carlos Végh, Inflation Stabilization and Nominal Anchors,” Contemporary Economic Policy, Vol. 12 (April 1994), pp. 3545.

    • Search Google Scholar
    • Export Citation
  • Canzoneri, Matthew B. Exchange Intervention Policy in a Multiple Country World,” Journal of International Economics, Vol. 13 (November 1982), pp. 26789.

    • Search Google Scholar
    • Export Citation
  • Clark, Peter, and others, Exchange Rates and Economic Fundamentals: A Framework for Analysis, IMF Occasional Paper No. 116 (Washington: International Monetary Fund, December 1994).

    • Search Google Scholar
    • Export Citation
  • Coats, Warren L., Reinhard W. Furstenberg, and Peter Isard, The SDR System and the Issue of Resource Transfers, Essays in International Finance, No. 180, Princeton University (Princeton, New Jersey: Princeton University Press, 1990).

    • Search Google Scholar
    • Export Citation
  • Commission of the European Communities, “One Market, One Money: An Evaluation of the Potential Benefits and Costs of Forming an Economic and Monetary Union,” European Economy, No. 44 (Brussels: Commission of the European Communities, October 1990).

    • Search Google Scholar
    • Export Citation
  • Crockett, Andrew, and Morris Goldstein, Strengthening the International Monetary System: Exchange Rates, Surveillance, and Objective Indicators IMF Occasional Paper No. 50 (Washington: International Monetary Fund, February 1987).

    • Search Google Scholar
    • Export Citation
  • Dominguez, Kathryn M., and Jeffrey A. Frankel, Does Foreign Exchange Rate Intervention Work? (Washington: Institute for International Economics, September 1993).

    • Search Google Scholar
    • Export Citation
  • Eichengreen, Barry, Real Exchange Rate Behavior Under Alternative Exchange Rate Regimes: Interwar Evidence,” European Economic Review, Vol. 32 (March 1988), pp. 36371.

    • Search Google Scholar
    • Export Citation
  • Eichengreen, Barry, Epilogue: Three Perspectives on the Bretton Woods System,” in A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, ed. by Michael D. Bordo and Barry Eichengreen (Chicago and London: University of Chicago Press, 1993).

    • Search Google Scholar
    • Export Citation
  • El-Erian, Mohammed, The Regulation and Supervision of Cross-Border Banking,” (unpublished; Washington: International Monetary Fund, 1992).

    • Search Google Scholar
    • Export Citation
  • Feldstein, Martin, Thinking about International Coordination,” Journal of Economic Perspectives, Vol. 2 (Spring 1988), pp. 313.

  • Fishlow, Albert, Lessons from the Past: Capital Markets During the 19th Century and Interwar Period,” Industrial Organization, Vol. 39 (Summer 1985), pp. 383439.

    • Search Google Scholar
    • Export Citation
  • Flood, Robert P. and Nancy Marion, Transmission of Disturbances under Alternative Exchange-Rate Regimes with Optimal Indexation,” Quarterly Journal of Economics, No. 97 (February 1982), pp. 4368.

    • Search Google Scholar
    • Export Citation
  • Frankel, Jeffrey A., and Shang-Jin Wei, Trade Blocs and Currency Blocs,” NBER Working Paper No. 4335 (Cambridge, Massachusetts: National Bureau of Economic Research, April 1993).

    • Search Google Scholar
    • Export Citation
  • Frenkel, Jacob A., and Morris Goldstein, Guide to Target Zones,” Staff Papers, International Monetary Fund, Vol. 33 (December 1986), pp. 63373.

    • Search Google Scholar
    • Export Citation
  • Frenkel, Jacob A., and Morris Goldstein, Macroeconomic Policy Implications of Currency Zones,” in Policy Implications of Trade and Currency Zones (Kansas City: Federal Reserve Bank of Kansas City, 1991).

    • Search Google Scholar
    • Export Citation
  • Frenkel, Jacob A., and Morris Goldstein, and Paul Masson, Characteristics of a Successful Exchange Rate System, IMF Occasional Paper No. 82 (Washington: International Monetary Fund, July 1991).

    • Search Google Scholar
    • Export Citation
  • Funabashi, Yoichi, Managing the Dollar: From the Plaza to the Louvre (Washington: Institute for International Economics, 1988).

  • Gagnon, Joseph E., Exchange Rate Variability and the Level of International Trade,” Journal of International Economics, Vol. 34 (May 1993), pp. 26987.

    • Search Google Scholar
    • Export Citation
  • Garber, Peter, The Collapse of the Bretton Woods Fixed Exchange Rate System,” in A Retrospective on the Bretton Woods System, ed. by Michael D. Bordo and Barry Eichengreen (Chicago and London: University of Chicago Press, 1993).

    • Search Google Scholar
    • Export Citation
  • Goldberg, Linda, Exchange Rates and Investment in United States Industry,” Review of Economics and Statistics, Vol. 75 (November 1993), pp. 57588.

    • Search Google Scholar
    • Export Citation
  • Goldstein, Morris, and others, Policy Issues in the Evolving International Monetary System, IMF Occasional Paper No. 96 (Washington: International Monetary Fund, June 1992).

    • Search Google Scholar
    • Export Citation
  • Goldstein, Morris, David Folkerts-Landau, and others, (1993a), International Capital Markets: Part I. Exchange Rate Management and International Capital Flows, World Economic and Financial Surveys (Washington: International Monetary Fund, April 1993).

    • Search Google Scholar
    • Export Citation
  • Goldstein, Morris, David Folkerts-Landau, and others, (1993b), International Capital Markets: Part II. Systemic Issues in International Finance, World Economic and Financial Surveys (Washington: International Monetary Fund, August 1993).

    • Search Google Scholar
    • Export Citation
  • Goldstein, Morris, and Michael Mussa, The Integration of World Capital Markets,” IMF Working Paper, WP/93/95 (Washington: International Monetary Fund, December 1993).

    • Search Google Scholar
    • Export Citation
  • Goldstein, Morris, David Folkerts-Landau, and others, International Capital Markets: Developments, Prospects, and Policy Issues, World Economic and Financial Surveys (Washington: International Monetary Fund, September 1994).

    • Search Google Scholar
    • Export Citation
  • Group of Ten Deputies, International Capital Movements and Foreign Exchange Markets: Report to the Ministers and Governors by the Group of Ten Deputies (Rome: Bank of Italy, April 1993).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, (1984a), Exchange Rate Volatility and the Level of International Trade, IMF Occasional Paper No. 28 (Washington: International Monetary Fund, July 1984).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, (1984b), Issues in the Assessment of the Exchange Rates of Industrial Countries, IMF Occasional Paper No. 29 (Washington: International Monetary Fund, July 1984).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, (1984c), The Exchange Rate System: Lessons of the Past and Options for the Future, IMF Occasional Paper No. 30 (Washington: International Monetary Fund, July 1984).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, The Role of the SDR in the International Monetary System, IMF Occasional Paper No. 51 (Washington: International Monetary Fund, March 1987).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, Exchange Arrangements and Exchange Restrictions: Annual Report 1993 (Washington: International Monetary Fund, 1993).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, International Financial Statistics, various issues.

  • Jurgensen, P., Report of the Working Group on Exchange Market Intervention,” (Washington: U.S. Treasury Department, March 1983).

  • Krugman, Paul, Louvre’s Lesson: Let the Dollar Fall,” The International Economy, (January/February 1988), pp. 7682.

  • Krugman, Paul, The Case for Stabilizing Exchange Rates,” Oxford Review of Economic Policy, Vol. 5 (Autumn 1989), pp. 6172.

  • Krugman, Paul, Target Zones and Exchange Rate Dynamics,” Quarterly Journal of Economics, Vol. 106 (August 1991), pp. 66982.

  • Maddison, Angus, Dynamic Forces in Capitalist Development: A Long-Run Cooperative View (Oxford and New York: Oxford University Press, 1991).

    • Search Google Scholar
    • Export Citation
  • Mundell, Robert A., A Theory of Optimum Currency Areas,” American Economic Review, Vol. 51 (September 1961), pp. 65765.

  • Mussa, Michael L., Exchange Rates in Theory and in Reality, Essays in International Finance, No. 179, Princeton University (Princeton, New Jersey: Princeton University Press, 1990).

    • Search Google Scholar
    • Export Citation
  • Rhomberg, Rudolf R., Failings of the SDR: Lessons from Three Decades,” in International Financial Policy: Essays in Honor of Jacques J. Polak, ed. by Jacob Frenkel and Morris Goldstein (Washington: International Monetary Fund and De Nederlandsche Bank, 1991).

    • Search Google Scholar
    • Export Citation
  • Schadler, Susan, Maria Carkovic, Alan Bennett, and Robert Khan, Recent Experiences with Surges in Capital Inflows, IMF Occasional Paper No. 108 (Washington: International Monetary Fund, December 1993).

    • Search Google Scholar
    • Export Citation
  • Shleifer, Andrei, and Lawrence H. Summers, The Noise Trader Approach to Finance,” The Journal of Economic Perspectives, Vol. 4, No. 2 (Spring 1990), pp. 1933.

    • Search Google Scholar
    • Export Citation
  • Solomon, Robert, The International Monetary System, 1945–1981 (New York: Harper & Row, 1982).

  • Svensson, Lars E.O., An Interpretation of Recent Research on Exchange Rate Target Zones,” The Journal of Economic Perspectives, Vol. 6 (Fall 1992), pp. 11944.

    • Search Google Scholar
    • Export Citation
  • Tavlas, George, The ‘New’ Theory of Optimum Currency Areas,” The World Economy, Vol. 16 (November 1993), pp. 66385.

  • Tobin, James, A Proposal for International Monetary Reform,” Cowles Foundation Discussion Paper No. 506 (New Haven: Cowles Foundation for Research in Economics at Yale University, October 1978).

    • Search Google Scholar
    • Export Citation
  • Ungerer, Horst, and others, The European Monetary System: Recent Developments, IMF Occasional Paper No. 48 (Washington: International Monetary Fund, December 1986).

    • Search Google Scholar
    • Export Citation
  • Ungerer, Horst, and others, The European Monetary System: Developments and Prospectives, IMF Occasional Paper No. 74 (Washington: International Monetary Fund, December 1990).

    • Search Google Scholar
    • Export Citation
  • Végh, Carlos, Stopping High Inflation,” Staff Papers, International Monetary Fund, Vol. 39 (September 1992), pp. 62695.

  • Williamson, John, The Exchange Rate System, Policy Analyses in International Economics, No. 5 (Washington: Institute for International Economics, 2nd ed., 1985).

    • Search Google Scholar
    • Export Citation
  • Williamson, John, and Marcus Miller, Targets and Indicators: A Blueprint for International Coordination of Economic Policy (Washington, Institute for International Economics, 1987).

    • Search Google Scholar
    • Export Citation
  • Williamson, John, and C. Randall Henning, Managing the Monetary System,” paper presented at a conference on “Managing the World Economy,” Washington, May 1994.

    • Search Google Scholar
    • Export Citation