International Political Economy and Exchange Rate Regime: A Question of Sustainability

Alban Mathieu

Review of Political Economy, 2024, vol. 36, issue 1, 256-267

Abstract: The aim of this article is to provide an alternative framework to the theory of optimum currency areas by mobilizing the concept of sustainability. If the success of a fixed exchange rate regime is, above all, a political choice, economic growth can be considered a minimal economic condition and a good indicator of the success of a fixed exchange rate regime. We conclude that specific institutional settings allow economic growth to occur and can be defined as sustainable. We determine three configurations that share the same conclusion: sustainability happens when states have macroeconomic autonomy, whereas political and fiscal integration are necessary conditions. The first configuration refers to a monetary union with high capital mobility. The second one corresponds to a fixed but adjustable exchange rate regime with low capital mobility, while the third configuration is an application of Keynes’ plan with high capital mobility.

Date: 2024
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DOI: 10.1080/09538259.2022.2037931

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