Ragnar Nurkse's Rule-Based Approach to International Monetary Relations: Complementarities with Chicago

Anthony Endres and G.A. Fleming

No 225, Working Papers from Department of Economics, The University of Auckland

Abstract: Ragnar Nurkse_s contributions in the 1940s provide rules for international policy coordination complementing the contemporary position outlined by the Chicago economist Henry Simons. Nurkse_s scheme was significantly different from Bretton Woods. Interwar currency and inflation experience underscored the ineffectiveness of sterilized intervention when proceeding with inconsistent monetary and fiscal policies and vague exchange rate commitments. Credible exchange rate rules are possible only with international coordination harmonized by inflation discipline. Nurkse uses an accelerationist, natural rate argument, thereby severely circumscribing attempts to subordinate monetary and fiscal policies to the growth of employment. Ultimately, countries participating in policy coordination must use macroeconomic policies to control the rate and variability of inflation. Nurkse_s scheme depends on the antiinflation and imported credibility messages embodied in his policy rules; insistence that rules be founded on publicly recognizable criteria; recognition of the NAIRU and negative view of trade restrictions and exchange controls. His analysis of policy coordination and scepticism regarding global schemes for international financial relations accord with received wisdom in the late twentieth century.

Keywords: Economics (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:auc:wpaper:225

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