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Monetary Governance in a World of Regional Currencies


The aim of this essay is to provide the first building blocks for a positive theory of currency regionalization. In the spirit of the actor-oriented framework outlined by Kahler and Lake (Chapter 1), the analytical focus here is the state–specifically, central decisionmakers responsible for currency policy. The working assumption is that economic globalization is driving policymakers to reconsider their historical preference for strictly national money. The question is: What delegation of authority is most likely to emerge in individual countries? What conditions are most likely to influence the choice among available options?

The essay is organized as follows. I begin in the first section with a brief look back at the dramatic transformation of global monetary relations that has occurred in recent decades–a period during which many governments, finding it increasingly difficult to sustain the market position of uncompetitive national currencies, have begun to reflect instead on the possibility of a regional currency of some kind. Section II then highlights the considerable leeway available in designing alternative forms of either currency unification or dollarization, while Section III identifies key factors that can be expected to dominate the calculations of rational policymakers in thinking about the choices before them. Taking all factors into account, it is clear that for many states traditional sovereignty will remain the preferred option. But taking account of possible variations in the degree of regionalization, it is also clear that for many other countries some form of monetary alliance or subordination could turn out to be rather more appealing.

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