5 - Rules and international monetary systems  pp. 114-152

Rules and international monetary systems

By Rodney Bruce Hall

Image View Previous Chapter Next Chapter



Monetary economics is a field where an understanding and appreciation of history is arguably more important than a lot of high powered mathematical and statistical analysis.

Michael Mussa

The first casualty of war may not be truth but money.

J. K. Galbraith

The international monetary order is a rule-based order. Its history is the history of the construction and demolition of rules: constitutive and regulative, explicit and tacit, substantive and procedural, national and transnational. Thus neoclassical economist Michael Mussa does well to suggest that an examination of the history of monetary economics may offer more insight into the nature of the topic than the more formal, also rule-based, constructed artifice of mathematics. It is rather odd that relatively little attention has been devoted to explication of the history of the international monetary order as rule-based order. This is so particularly as international monetary history is often organized according to a changing periodization of constitutive and regulative rules.

Economic historian Gianni Toniolo, for example, periodizes international monetary history in the late nineteenth to twentieth centuries as characterized by (1) a classical gold standard ending 1914; (2) a system of pegged exchange rates from 1914 to 1924 and again from the mid-1930s to late 1940s, interspersed with (3) a gold exchange standard (attempts to reconstruct gold parities) from 1924 to 1931 to 1936, depending upon accounts of when these attempts were abandoned, followed by (4) the Bretton Woods gold–dollar parity from the late 1940s to early 1970s.

Alan Blinder, Charles Goodhart, Phillip Hildebrand, David Lipton, and Charles Wyplosz, How Do Central Banks Talk? Geneva Reports on the World Economy 3 (Geneva: International Centre for Monetary and Banking Studies, 2001), p. 84
Barry Eichengreen, Globalizing Capital: A History of the International Monetary System (Princeton, NJ: Princeton University Press, 1996), pp. 25–6.
Ben S. Bernanke, Thomas Loubach, Frederic S. Mishkin, and Adam S. Posen, Inflation Targeting: Lessons from the International Experience (Princeton, NJ and Oxford: Princeton University Press, 1999), pp. 21–2
Benjamin F. Friedman and Kenneth Kuttner, “A Price Target for US Monetary Policy? Lessons from the Experience with Money Growth Targets” Brookings Papers on Economic Activity 1 (1996): 77–146
Benjamin J. Cohen, “Monetary Governance in a World of Regional Currencies” in Miles Kahler and David A. Lake (eds.) Governance in a Global Economy (Princeton, NJ: Princeton University Press, 2003), tables 6A.1 and 6A.2, p. 165
Edwin M. Truman and Anna Wong, The Case for an International Reserve Diversification Standard, Working Paper WP 06–2 (May 2006) (Washington, DC: Institute for International Economics, 2006), p. 26
Finn Kydland and Edward Prescott, “Rules Rather than Discretion: The Inconsistency of Optimal Plans” Journal of Political Economy (June 1977): 473–91
John Hawkins, Globalisation and Monetary Operations in Emerging Economies, BIS Papers 23 (Basle: Bank for International Settlements, 2005)
Jozef Van ‘t dack, Implementing Monetary Policy in Emerging Market Economies: An Overview of Issues, BIS Papers 5 (Basle: Bank for International Settlements, 1999), p. 39
Kenneth Rogoff, “The Optimal Degree of Commitment to an Intermediate Monetary Target” Quarterly Journal of Economics 100(4) (1985): 1169–90
Kenneth W. Dam, Rules of the Game: Reform and Evolution in the International Monetary System (Chicago, IL: University of Chicago Press, 1982), p. 19
Manuel Guitán, “Rules or Discretion in Monetary Policy: National and International Perspectives” in Tomás J. T. Baliño and Carlo Cottarelli (eds.) Frameworks for Monetary Stability: Policy Issues and Country Experiences (Washington DC: International Monetary Fund, 1994), p. 22
Michael D. Bordo and Finn E. Kydland, “The Gold Standard as a Rule” in Barry Eichengreen and Marc Flandreau (eds.) The Gold Standard in Theory and History (London and New York: Routledge, 1985), p. 15
Michael Mussa, “The Triumph of Paper Credit” in Forrest Capie and Geoffrey E. Wood, Monetary Economics in the 1990s, The Henry Thornton Lectures 9–17 (London: Macmillan, 1996), p. 170
Paul Moser-Boehm, “The Relationship Between the Central Bank and the Government” in Central Banks and the Challenge of Development (Basle: Bank for International Settlements, 2006), p. 49
R. Anton Gilbert, “Operating Procedures for Conducting Monetary Policy” Bulletin: Federal Reserve Bank of St. Louis (February 1985): 15
Robert J. Barro and David Gordon, “A Positive Theory of Monetary Policy in a Natural Rate Model” Journal of Political Economy (August 1983): 589–610
Rodney Bruce Hall and Thomas J. Biersteker (eds.) The Emergence of Private Authority in Global Governance (Cambridge, UK: Cambridge University Press, 2002)
William Poole, “Monetary Policy Rules?” Review: Federal Reserve Bank of St. Louis (March/April 1999), p. 11