International Monetary Reform
In the previous chapters, we have emphasised that international monetary theory, like other areas of macro-economic analysis, has been dominated by two conceptions of the adjustment process: the ‘price-adjustment’ and the ‘inventory-adjustment’ mechanisms. These are frequently referred to as Marshallian and Keynesian, respectively. We now turn our attention to the implications of these assumptions for the choice of international monetary system. In doing so, we shall be concerned with four alternatives: (1) the adjustable peg system, currently in operation; (2) a flexible exchange-rate system; (3) a common-currency arrangement: and (4) modifications of (1) and (2) which involve some flexibility.
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