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Federal Reserve Bank of Dallas
Globalization Institute Working Papers
How false beliefs about exchange rate systems threaten global growth and the existence of the Eurozone
The current belief system that says “all will be well” if domestic price stability can be maintained is fundamentally flawed. If this can be achieved only through monetary, credit and debt expansion, the end result will be an increased risk of systemic crisis. Moreover, false beliefs about how exchange rate systems function, at both the global level and within the Eurozone, imply international “spillover” effects that increase both the likelihood and the seriousness of such crises. Gross international capital flows pose as many (perhaps more) dangers than do net flows (ie current account imbalances). And false beliefs about exchange rate regimes not only compromise crisis prevention, but they also hinder crisis management and resolution. At the global level, we still lack the instruments to do either effectively should current problems worsen. In the Eurozone, the crisis which began in 2010 has not been well managed and remains fundamentally unresolved.
Cite this item
William R. White, How false beliefs about exchange rate systems threaten global growth and the existence of the Eurozone, Federal Reserve Bank of Dallas, Globalization Institute Working Papers 250, 01 Sep 2015.
- B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
- F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
This item with handle RePEc:fip:feddgw:250
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