0321316762_IM_18 - Chapter 18 The International Monetary...

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Chapter 18 The International Monetary System, 1870–1973 T Chapter Organization Macroeconomic Policy Goals in an Open Economy Internal Balance: Full Employment and Price-Level Stability External Balance: The Optimal Level of the Current Account Problems with Excessive Current Account Deficits Problems with Excessive Current Account Surpluses International Macroeconomic Policy Under the Gold Standard, 1870–1914 Origins of the Gold Standard External Balance Under the Gold Standard The Price-Specie-Flow Mechanism The Gold Standard “Rules of the Game”: Myth and Reality Box: Hume v. the Mercantilists Internal Balance Under the Gold Standard Case Study: The Political Economy of Exchange Rate Regimes: Conflict Over America’s Monetary Standard During the 1890s The Interwar Years, 1918–1939 The Fleeting Return to Gold International Economic Disintegration Case Study: The International Gold Standard and the Great Depression The Bretton Woods System and the International Monetary Fund Goals and Structure of the IMF Convertibility and the Expansion of Private Capital Flows Speculative Capital Flows and Crises Analyzing Policy Options Under the Bretton Woods System Maintaining Internal Balance Maintaining External Balance Expenditure-Changing and Expenditure-Switching Policies
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106 Krugman/Obstfeld • International Economics: Theory and Policy, Seventh Edition The External-Balance Problem of the United States Case Study: The Decline and Fall of the Bretton Woods System Worldwide Inflation and the Transition to Floating Rates Summary T Chapter Overview This is the first of five international monetary policy chapters. These chapters complement the preceding theory chapters in several ways. They provide the historical and institutional background students require to place their theoretical knowledge in a useful context. The chapters also allow students, through study of historical and current events, to sharpen their grasp of the theoretical models and to develop the intuition those models can provide. (Application of the theory to events of current interest will hopefully motivate students to return to earlier chapters and master points that may have been missed on the first pass.) Chapter 18 chronicles the evolution of the international monetary system from the gold standard of 1870–1914, through the interwar years, and up to and including the post-World War II Bretton Woods regime that ended in March 1973. The central focus of the chapter is the manner in which each system addressed, or failed to address, the requirements of internal and external balance for its participants. A country is in internal balance when its resources are fully employed and there is price level stability. External balance implies an optimal time path of the current account subject to its being balanced over the
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This note was uploaded on 05/18/2010 for the course ECON 203 taught by Professor Kim during the Spring '10 term at Korea University.

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0321316762_IM_18 - Chapter 18 The International Monetary...

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