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One World, One Currency:
Destination or Delusion?

Wednesday, November 8, 2000, 3:00-4:30 p.m.
International Monetary Fund
IMF Auditorium, Red Level, (R-710)
700 19th Street, N.W.

As perceptions grow that the world is gradually segmenting into a few regional currency blocs, the logical extension of such a trend also emerges as a theoretical possibility: a single world currency. If so many countries see benefits from currency integration, would a world currency not maximize these benefits?

The dollar bloc, already underpinned by the strength of the U.S. economy, has been extended further by dollarization and regional free trade pacts. The euro bloc represents an economic union that is intended to become a full political union likely to expand into Central and Eastern Europe. A yen bloc may emerge from current proposals for Asian monetary cooperation. A currency union may emerge among Mercosur members in Latin America, a geographical currency zone already exists around the South African rand, and a merger of the Australian and New Zealand dollars is a perennial topic in Oceania. Arguments can persuasively be made on both sides of the issue:

  • The same commercial efficiencies, economies of scale, and physical imperatives that drive regional currencies together also presumably exist on the next level—the global scale. Why not maximize the benefits for all through a single currency for the ultimate geographical unit—the world?

  • The smaller and more vulnerable economies of the world—those that the international community is now trying hardest to
    help—would have most to gain from the certainty and stability that would accompany a single world currency.

Or, conversely:

  • The travails of the euro since its introduction last year are a stark reminder of the dangers of corralling different and divergent economies into a single currency, however advanced they may be. True single-currency candidates require international replication that is not found among real, functioning, market economies.

  • Under a single regional currency, normal cyclical movements in a country's macroeconomic indicators suddenly become threats to regional stability that must be muffled or suppressed, irrespective of their self-correcting impetus or the economic signals they are transmitting.

    These and other issues will be addressed by three panelists at this forum:

    Robert Mundell, Professor of Economics at Columbia University in New York, is known as the father of the theory of optimum currency areas. He has written extensively on the history of the international monetary system and played a significant role in the founding of the euro. He won the 1999 Nobel Prize for Economics.

    Maurice Obstfeld, Professor of Economics at the University of California, Berkeley, has interests in international finance and economics and has served as a consultant for the IMF, the World Bank, the European Commission, and several central banks.

    Paul Masson, senior advisor, IMF Research Department, has modeled the credibility of monetary policy, studied aspects of European integration, and written on exchange rate regimes and, most recently, on a project for a West African currency area.

The forum will be moderated by Alexander Swoboda, senior policy advisor at the IMF Research Department, whose brief includes work on the new architecture of the international monetary and financial system and on exchange rate regimes.