The Instability and Inequities of the Global Reserve System

Jose Antonio Ocampo

Working Papers from United Nations, Department of Economics and Social Affairs

Abstract: This paper argues that the current global reserve system is inherently unstable due to the use of a national currency as the major international reserve currency, and the high demand for “self-insurance” by developing countries. The latter is due to the mix of highly pro-cyclical capital flows and the limited room to maneuver that developing countries have to manage counter-cyclical macroeconomic policies. Both features imply that the system is also inequitable. An important insight of the paper is that such inequities feed into the instability of current arrangements. Any meaningful reform of the system must therefore address these two interlinked features.

Keywords: Global reserve currency; seigniorage powers; financial volatility; pro-cyclical macroeconomic policies; self-insurance; inequities of international economic order (search for similar items in EconPapers)
JEL-codes: F02 F33 F55 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2007-11
New Economics Papers: this item is included in nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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http://www.un.org/esa/desa/papers/2007/wp59_2007.pdf (application/pdf)

Related works:
Journal Article: The Instability and Inequities of the Global Reserve System (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:une:wpaper:59

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