Abstract
One of the fundamental problems of international monetary relations is how and to what extent national economies should be incorporated into monetary unions. A main concern of the countries belonging to the European Community is the process of their monetary integration. For the world as a whole, the basic question is whether a subset of countries—or all the nations —should unite into a single currency area with fixed exchange rates or each nation should remain as an independent currency area with floating exchange rates.1
I am very much indebted to Professor Charles P. Kindleberger for his constructive suggestions. I am also grateful to Professors Robert Z. Aliber, John Greenwood, Takashi Inoguchi, Kinhide Mushakoji and Kanji Ishii for their helpful comments.
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Notes
The most recent include W. M. Corden, Monetary Integration, Essays in International Finance, no. 93, Princeton (1972);
and J. C. Ingram, The Case for European Monetary Integration Essays in International Finance, no. 98, Princeton (1973)
H. G. Johnson and A. K. Swoboda (eds) The Economics of Common Currencies, Allen & Unwin, London (1973).
See the concluding remark of L. B. Yeager, International Monetary Mechanism, Holt, Rinehart & Winston, New York (1968).
M. Olson Jr, ‘The Logic of Collective Action: Public Goods and Theory of Groups’, Harvard Economic Studies, vol. 124, Cambridge (1965).
K. Hamada, ‘Alternative Exchange Rate Systems and the Interdependence of Monetary Policies’, in R. Z. Aliber (ed.) National Monetary Policies and the International Financial System, University of Chicago Press (1974).
Early writers emphasised this benefit of monetary integration. See T. Guggenheim, ‘Some Early Views on Monetary Integration’, in Johnson and Swoboda (eds) The Economics of Common Currencies op. cit.
K. Burnner and A. H. Meltzer, ‘The Use of Money: Money in the Theory of an Exchange Economy’, American Economic Review, vol. 61 (1971) pp. 784–805.
J. Marcus Fleming, ‘On the Exchange Rate Unification’, Economic Journal, vol. 81 (Sep 1971) pp. 467–88.
R. I. McKinnon, ‘Optimal Currency Areas’, The American Economic Review (Sep 1963) vol. 53, no. 4, pp. 717–25.
M. Olson Jr, ‘The Logic of Collective Action’, loc. cit., and also Mancur Olson and Richard Zeckhauser, ’An Economic Theory of Alliances’, Review of Economics and Statistics, vol. 43 (Aug 1966) pp. 266–79.
R. E. Wagner, ‘Pressure Groups and Political Entrepreneurs: A Review Article’, Papers on Non-Market Decision Making, vol. 1 (1966) pp. 161–70.
N. Frohlich, J. A. Oppenheimer and O. R. Young, Political Leadership and Collective Goods, Princeton, N. J. (1971).
Similar approach was taken in H. R. Kramer, ‘Experience with Historical Monetary Unions’, in H. Giersch (ed.) Integration durchWahrungsunion, Institute fur Weltwirtsschaft an der Universitat Kiel, Mohr, Tübingen (1971).
G. Stolper, The German Economy: 1870 to the Present (translated by T. Stolper), Harcourt, Brace & World (1967): W. O. Henderson, The Zollverein, Cambridge University Press (1939).
S. B. Clough, The Economic History of Modern Italy, Columbia University Press, N.Y. (1964).
Y. Sakudo, Kinsei Nihon Kaheishi (Monetary History of Modern Japan), Kobundo, Tokyo (1968).
K. Yamaguchi Hansatsu Shi Kenkyu Josetsu ( Towards the History of Local Notes ), Bank of Japan (1966).
See, for details, H. P. Willis, A History of the Latin Monetary Union: A Study of International Monetary Action University of Chicago Press (1901): see also Krämer, op. cit., A. Nielsen, ‘Monetary Union’, Encyclopedia of Social Science vol. X, New York (1933).
H. G. Johnson, ‘The Monetary Approach to Balance of Payments Theory’, Journal of Financial and Quantitative Analysis (Mar 1972). The statement in the text assumes the unitary elasticity of the demand for money. But it can be generalised easily to the case of non-unitary elasticity.
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© 1977 Graduate School of Business, University of Chicago
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Hamada, K. (1977). On the Political Economy of Monetary Integration: A Public Economics Approach. In: Aliber, R.Z. (eds) The Political Economy of Monetary Reform. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-02998-3_2
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