International reserves and payments adjustment

Abstract

Experts have for some time agreed that the international monetary system is not working correctly. Moreover, it is widely accepted that there are three logically distinct, although interrelated problems, those of international liquidity, of payments adjustment, and of confidence. While the relationships between the three problems are well recognized, the separation of them has been useful not only for theoretical analysis but for practical policy. In their efforts to improve the monetary system, governments have distinguished between the three problems, and, despite disagreement as to which of the three problems most urgently needs solution, progress has been made by dealing with them one at a time. We are now at a stage in the effort to improve the international monetary system in which it is timely to reappraise the conventional view of that progress and of the relative importance of some of the problems that remain unsolved.

JEL: E42, F32, F42