Theoretical Problems of the International Monetary System

Harry G. Johnson


Since 1958, international economists have been greatly
concerned with the problem of international monetary reform. Research
and writing on this problem has taken one or other of two broad forms.
Those economists most concerned with policy have concerned themselves
with emphasizing the need for inter¬national monetary reform and
propounding workable (negotiable) schemes for achieving it.
International monetary theorists, on the other hand, have been concerned
with the theoretical policy problems of achieving and maintaining
balance-of-payments equilibrium in the present internaticnal monetary
system of fixed exchange rates. They have also become concerned with the
problems of the system as a monetary system. This paper belongs to the
latter category. It seeks to outline the main propositions of the
analysis of international economic policy and policy problems that have
been developed by economists working in this field in recent years. Part
I is concerned with the economic policy problems of maintaining both
full employ¬ment and balance-of-payments equilibrium, first for a single
country on a fixed exchange rate, then for two or more countries linked
in a multi-country inter¬national monetary system. Part II is concerned
with certain features of the present international monetary system,
viewed as a monetary system. The analysis of Part I is Keynesian, that
of Part II classical, in approach. Both parts draw heavily on papers
presented at the University of Chicago Conference on Inter¬national
Monetary Problems organized by R. A. Mundell, held at Chicago in
September 1966.

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