International Monetary Integration Antony Mueller

Currency Arrangements Avoiding the volatility of exchange rate movements Avoiding the volatility of exchange rate movements Currency pegs, currency baskets, asymmetrical and symmetrical arrangements Currency pegs, currency baskets, asymmetrical and symmetrical arrangements Single currency areas Single currency areas Role of monetary and fiscal policy Role of monetary and fiscal policy

European Monetary Integration Beginning in the 1950s (Bretton Woods) Beginning in the 1950s (Bretton Woods) 1973 European Monetary System 1973 European Monetary System 1999 Common Currency in Banking 1999 Common Currency in Banking 2002 The Euro as a physical currency 2002 The Euro as a physical currency Arrangements: strict independence of European Central Bank, strict orientation to price stability, budget deficit controls, violations Arrangements: strict independence of European Central Bank, strict orientation to price stability, budget deficit controls, violations

Global reserve currency Dollar accounts for 65 per cent of global international reserves (weight of US economy about 17 per cent) Dollar accounts for 65 per cent of global international reserves (weight of US economy about 17 per cent) Currency diversification is going on into euro, and gold Currency diversification is going on into euro, and gold Asian central bank increased their dollar reserves Asian central bank increased their dollar reserves New movement into gold observable New movement into gold observable

Monetary Integration in Latin America Dominance of US dollar orientation Dominance of US dollar orientation Dollar orientation is not congruent with trade Dollar orientation is not congruent with trade Lack of fiscal and monetary control Lack of fiscal and monetary control Trade integration requires monetary integration Trade integration requires monetary integration Lack of institutions buildings Lack of institutions buildings

Regionalism and Globalization Demise of the nation state? Demise of the nation state? New global issues (finance, trade, environment, terrorism) New global issues (finance, trade, environment, terrorism) Increased relevance of micro regions along with increased relevance of macro regions Increased relevance of micro regions along with increased relevance of macro regions “made by BMW” “made by BMW” Impact on global power structure Impact on global power structure