International monetary reform

Abstract

The present structure behind the international monetary mechanism is showing various signs that prove that this structure is not appropriate to move the world economy towards the desired equilibrium and hence increase the efficiency of resource allocation. The present mechanism is characterised by the lack of international cooperation between countries, exchange rates that are regulated by a managed floating regime which is producing various misalignments and other problems in the international markets as well as the flooding of international reserves. All these characteristics are certainly not welfare maximizing. This dissertation will look deeply in the causes of the troubles in the present system and analyse the various alternatives of reform available to the international community. The basic objective to achieve is a reformed international monetary system that will provide a framework for world prosperity, sustainable growth and structural changes. The reformed system should provide a pattern of exchange rates that are realistic, equitable and generally stable.