This paper analyzes current stresses in the two key areas that concerned the architects of the original Bretton Woods system: international liquidity and exchange rate management. Despite radical changes since World War II in the market context for liquidity and exchange rate concerns, they...

This paper discusses the conditions under which currency unions would be desirable and viable. We discuss and present new empirical evidence concerning the operation of existing currency unions in federal states and among regional country groupings. In particular, we examine the traditional...

Monetary arrangements in Europe vacillated wildly over the last decade, and they may be expected to continue to do so over the next. The literature on this chaotic process has focused on issues of credibility. Here, we focus instead on the longer-run implications of Europe's choice of monetary...

In this paper we argue, first, that the Maastricht-inspired policy mix of monetary and fiscal restriction applied during the first half of the 1990s is, to a significant extent, responsible for the build-up of both the unemployment rate and the government debt to GDP ratios on the European...

The Maastricht Treaty and the Madrid Council decision severely restrict the choice of the euro conversion rates. In practical terms the authorities can only select the Ecu rates prevailing in the market the day before conversion. The market will lack a fixed point, however, so that infinite...

Three main features characterize the international financial integration of China and India. First, while only having a small global share of privately-held external assets and liabilities (with the exception of China’s FDI liabilities), these countries are large holders of official reserves....

The paper considers the pros and cons for Canada of monetary union between Canada and the U.S. The current Canadian monetary arrangements, a flexible exchange rate and an inflation target, are contrasted both with a unilateral adoption by Canada of the U.S. dollar and with a full, formally...

A model of optimum currency areas is presented using a general equilibrium model with regionally differentiated goods. The choice of a currency union depends upon the size of the underlying disturbances, the correlation between these disturbances, the costs of transactions across currencies,...

The use of forward interest rates with a settlement time after the start of EMU (1 January 1999) allows us to derive probabilities attached by the market to the occurrence of EMU. We use the DM/ECU forward interest rates as our central source of information. We arrive at the conclusion that the...