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Is there a valid argument for international cooperation, and some form of international governance structure, in the international monetary realm? On the purely economic front, the argument is not strong. Yet a broader political economy approach concludes that national currency policy can in fact impose non-pecuniary externalities on partner nations. This is especially the case with major policy-driven misalignments, which cannot easily be countered by other governments. For example, one country's substantially depreciated currency can provoke powerful protectionist pressures in its trading partners, so that exchange rate policy spills over into trade policy in potentially damaging ways. Inasmuch as one government's policies create these sorts of costs for other countries, and for the world economy as a whole, there is a case for global governance. This might include some institutionalized mechanism to monitor and publicize substantial currency misalignments. While there appears to be little global political attention to such a mechanism now, there have been initiatives along these lines at the regional level, and the current crisis may have stimulated more general stirrings of interest.

Is there a valid argument for international cooperation, and some form of international governance structure, in the international monetary realm? On the purely economic front, the argument is not strong. Yet a broader political economy approach concludes that national currency policy can in fact impose non-pecuniary externalities on partner nations. This is especially the case with major policy-driven misalignments, which cannot easily be countered by other governments. For example, one country's substantially depreciated currency can provoke powerful protectionist pressures in its trading partners, so that exchange rate policy spills over into trade policy in potentially damaging ways. Inasmuch as one government's policies create these sorts of costs for other countries, and for the world economy as a whole, there is a case for global governance. This might include some institutionalized mechanism to monitor and publicize substantial currency misalignments. While there appears to be little global political attention to such a mechanism now, there have been initiatives along these lines at the regional level, and there are some early stirrings of interest more generally.

Many Europeans support common European Union (EU) representation in international institutions. But such a pooling of international political influence raises complex and controversial issues. A common European foreign policy position implies compromise among EU members. The pooling of international representation thus requires, as with many internal EU policies, that member states weigh the potential benefits of a common policy against the potential costs of a policy not to their liking. There can be a tradeoff between the advantages of scale and the disadvantages of overriding heterogeneous preferences. Simple spatial models help to make this point, to clarify the circumstances in which a common European international representation is most likely, and to explain who is most likely to support or oppose a pooling of European foreign policies.

In den 30 Jahren vor Vollendung der EWWU waren die europäischen Währungspolitiken sowohl für einzelne Länder als auch über die Zeit sehr unterschiedlich. Dieser Artikel vertritt die Ansicht, dass die sektoralen Auswirkungen regionaler Wechselkurssysteme, inbesondere die erwarteten realen Wirkungen auf den europäischen Handel und die Investitionen, eine wichtige Rolle für den Verlauf der europäischen Integration hatten. Der wichtigste Nutzen der Festlegung europäischer Wechselkurse waren die Erleichterung von Aussenhandel und Investitionen; die wichtigsten Kosten war die Aufgabe nationaler Regierungen der Währungspolitik als Instrument zur Beeinflussung der nationalen Wettbewerbsposition. Empirische Ergebnisse zeigen tatsächlich, dass eine stärkere und stabilere Währung mit einer größeren Bedeutung von verarbeiteten Exporten für Kern des Hartwährungsgebietes der EU einherging, während Abwertungen mit einer Zunahme des Importwettbewerbsfür die Produzenten dieser Länder verbunden war. Diese Evidenz legt einen starken realen Einfluss realer Handels- und Investitionsfaktoren und von privaten Interessen, die sich um diese Faktoren gruppieren, auf nationale Politiken nahe. (SWP-Jns)

In the thirty years before Economic and Monetary Union was achieved, European currency policies varied widely among countries and over time. In this article, I argue that the sectoral impact of regional exchange-rate arrangements, in particular their expected real effects on European trade and investment, exerted a powerful influence on the course of European monetary integration. The principal benefit of fixing European exchange rates was facilitation of cross-border trade and investment within the European Union (EU); the principal cost of fixed rates was the loss of national governments' ability to use currency policy to improve their producers' competitive position. Empirical results indeed indicate that a stronger and more stable currency was associated with greater importance of manufactured exports to the EU's hard-currency core, while depreciations were associated with an increase in the net import competition faced by the country's producers. This suggests a powerful impact of real factors related to trade and investment, and of private interests concerned about these factors, in determining national currency policies.

Discusses the European Monetary Union (EMU) and the euro single currency, to be adopted by 11 EU countries on Jan. 1, 1999.

The battle over gold is typically explained as driven by proinflation debtors. However, going off gold would also have caused a depreciation, raising tradable prices relative to nontradables prices and helping producers of exportable primary products. An analysis of Congressional votes on monetary legislation indicates that higher constituency debt levels were not associated with opposition to gold, whereas mining and agricultural production were. This suggests that gold politics was at least as much about the impact of the exchange rate on relative prices as it was about inflation of the overall price level.

Members of the European Union (EU) have long attempted to unify their monetary policies, whether by fixing exchange rates or moving toward a single currency. The success of these attempts has varied over time, and among EU member states. This article argues that the degree to which a country is integrated into EU trade and finance has a major impact on its willingness to make the sacrifices necessary to pursue monetary integration, especially stability against Europe's anchor currency, the Deutsche Mark (DM). Higher levels of intra-European trade and investment increase the desirability of stabilizing exchange rates between European countries. Statistical evidence indicates that greater integration of goods and capital markets is associated with greater success in fixing national exchange rates against the DM. This implies that pressures for monetary integration will continue but will vary among countries, along with the degree to which they are economically linked to European trade and investment.