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ONE WORLD, ONE MONEY? PLUS |
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"'A couple of prima donnas': Managing Mundell-Friedman" by Terence Corcoran Financial Post editor-in-chief Terence Corcoran, who conceived and organized the Mundell-Friedman debate, explains how it came to be, how it ran, and how it ended—ended twice, in fact. "One world, one money?" by Milton Friedman and Robert Mundell Robert Mundell and Milton Friedman debate the virtues—or not—of fixed exchange rates, gold, and a world currency.
"The Chicago School in the 1960s" by Rudiger Dornbusch [Artice summary not available] "Currency unions: Europe vs. the United States" by James Tobin Next January, with the introduction of coins and paper currency, the euro experiment enters phase II. In forming a continent-wide currency union, Europeans are following the two-century-old example of the United States of America. But the US and Europe differ in several important respects, ranging from the openness of their internal markets to the flexibility of their labour markets to the size and responsiveness of their continental fiscal institutions. Without far-ranging changes to European institutions, it is hard to see how the euro can succeed. "Mundell and Friedman: Four key disagreements" by Richard G. Harris Despite agreement on the broad theoretical framework common to modern macroeconomists, Professors Mundell and Friedman appear to disagree on four key issues: the efficiency and stability of foreign exchange markets, the flexibility of prices and wages, the significance of national economic size, and the importance of political constraints on monetary arrangements. Consideration of these questions for Canada suggests a credibly fixed exchange rate with the US dollar would be the best policy. "Central banks: Who needs them?" by Kevin Dowd Robert Mundell and Milton Friedman mainly agree that modern central banks have not used their control over national currencies well. We need a monetary regime that restores the automaticity of the gold standard, but without its dependence on unpredictable changes in the supply of gold. The best alternative would be a currency board that targeted the price of an inflation index. In the long run, the development of e-money and the resulting explosion of the supply of money may force central banks into such a fixed rule. "Would fixed rates make markets more flexible?" by Christopher Ragan The Bank of Canada has run a very credible anti-inflation policy over the last decade, so the effects of the exchange rate regime on the credibility of monetary policy are not important in the Canadian policy debate on fixed vs. flexible exchange rates. The policy choice comes down to the macroeconomic benefit of the shock absorber that flexible rates provide vs. the greater economic certainty fixed rates bring. If fixed rates were to induce greater labour market flexibility that would itself act as a shock absorber, that would cinch the argument for them. But economic research is mainly silent on whether they do have this effect. "New currency regimes: How green the grass? How high the fence?" by William B. P. Robson The best way to make your economic lawn look as luxurious as your neighbour’s is not necessarily to tear down the fence and let him take over your turf. If, as a currency union would require, Canadians gave control of their monetary policy to the US Federal Reserve Board, an agency ultimately beholden only to US voters would be responsible for a large part, not only of Canadian macroeconomic policy but also of Canadian banking regulation. History suggests it could not really be counted on to do a better job at either. Canadians should focus instead on home-grown ways of making their own garden flourish. "The missing link in the debate on monetary regulation" by Jean-Luc Migué Fixed exchange rates don’t actually impose severe restrictions on governments. In fact, they are usually accompanied by a set of redistributive policies and institutions whose main purpose is to delay or even prevent economic adjustment within currency unions. The virtue of a system of competing flexible rates is that the competition they provide gives producers, investors and ordinary taxpayers a choice of which money and/or jurisdiction they wish to favour. The Donner Prize: Tom Flanagan The Donner Prize for 2000 was awarded to Tom Flanagan for his book First Nations? Second Thoughts. Here are his remarks upon receiving the prize, May 8 in Toronto. "Paul Martin's milestone: One for the record books" by Geoffrey Hale As of this month, Paul Martin becomes the fifth-longest serving finance minister in the country’s history. By the end of the year, should he continue as minister, he would be second-longest. In terms of changing how things are done, he has few rivals. The Department of Finance is again pre-eminent in policy-making; the policy agenda of Canadian liberalism has been entirely re-written; spending ministries have been brought to heel; and policy now has a coherence and discipline unknown in the last three decades. Whether it all survives Mr. Martin’s eventual departure remains to be seen. |
