Optimum world monetary arrangements and the dual currency system

Abstract

Recently some concerns have been expressed over constraints placed on American monetary and fiscal policy by balance of payments problems. Conversely, the attempts of several European countries to control inflation have been hampered by large capital inflows attracted by high interest rates. Thus, the “Group of Ten” members of the International Monetary Fund recently appointed a study committee to examine world monetary arrangements, particularly liquidity needs. The present work discusses optimum world monetary arrangements, which would seem to be significantly different from present arrangements. The different economic needs and positions of various areas are distinguished; in particular, the internal problems of Western Europe are differentiated from the position of Western Europe vis-a-vis the United States.

JEL: E42, F33