The Global Monetary System : Its Weaknesses and the Role of the IMF, the EU and NAFTA

This paper argues that the global monetary system has exhibited significant instability since the collapse of the Bretton Woods regime in 1971. The recent challenge for economists and policy makers is the creation of a global monetary system that offers greater exchange rate stability without sacrificing international capital mobility. This paper proposes a solution that consists of three components. First, strengthening the international financial architecture to bring stability, primarily to emerging nations. Second, eventually creating a monetary union in NAFTA and extending it to other countries of the American hemisphere to bring stability to this region a la the EMU. Third, coordinating economic policies among the U.S., EU and Japan to stabilize these three key global currencies