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Economics Commentary offers analyses and opinions on international monetary affairs and emerging markets capital markets developments. The content is primarily concerned with changes in the international monetary system and its impact on economic policies and international capital markets and draws extensively on participations in key international economic policy fora. Economics Commentary aims to support the public debate and markets' understanding of major international monetary and emerging capital markets developments.

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Is the dollar still international enough?

Conference—World Finance Forum

Beijing, 30 June 2018

[...] I would like to explore the nexus between uncertainty and the direction of the international monetary system to address the question: Is the dollar still international enough to serve the international economy? As you know, the dollar remains by far the dominant international currency and a great number of countries, including China, maintain monetary policy frameworks that rely on the dollar as anchor currency. New financial technologies may now allow to overcome the entrenched advantages of the dollar. Decentralisation may be the new approach to integration. [...]

Swiss sovereign money referendum and the architecture of money

11 June 2018

The referendum on the Swiss sovereign money initiative (Vollgeldinitiative) of 10 June served as an important reminder that the modalities of the production of money are not set in stone. Its failure should not be seen as confirmation that central banking and money do not require some fundamental rethink. The initiative’s objective to suspend fractional reserve banking and provide central bank money to everyone was not its most radical proposition. It was the legalisation of cryptocurrencies and envisaged money competition. The referendum offered a true change in the architecture of money with likely important broader impulses for the international monetary system. [...]

ECB looks very 19th century

4 June 2018

The European Central Bank (ECB) may long have decided to switch its main instrument from interest rate setting to direct lending. Its persistent low and unchanged interest rates and maintenance of net asset purchases brings the ECB close to the origins of central banking. While the ECB was seen as a successor to the Bundesbank, it may now look increasingly closer to its ancestor the German Imperial Bank (Reichsbank). [...]

Beggar-thy-neighbour and inter-RFA coordination

Second joint RFA research seminar

Cartagena, 17 May 2018

The importance of coordination among regional financing arrangements (RFAs) to strengthen the global financial safety net (GFSN) has been well established. The number of institutions offering adjustment lending requires some coordination to mitigate duplication and strengthen effectiveness. However, too little attention is given to the outcome of adjustment such that adjustment of one country does not unduly impair prospects of other countries or regions. This fundamental principle of avoiding a beggar-thy-neighbour approach represents one of the most important rationales for seeking close coordination of RFAs. Yet, it remains elusive. [...]

Emerging markets vulnerability to exchange rate shocks—A curative approach

3 May 2018

The U.S. Federal Reserve announced on 2 May that it will keep its policy rate at its current level. The Fed reiterated that it sees economic conditions warranting "further gradual increases in the federal funds rate." Emerging markets currencies have notoriously been vulnerable to U.S. interest rate rises and in particular a stronger dollar. The prospect of a sustained rate increase therefore causes some disquiet or worse. Yet, it is important to be reminded that emerging markets exchange rate vulnerability seems largely "self-inflicted." A curative approach is needed. [...]

The geography of money

OMFIF May Bulletin, 1 May 2018

The quest for international currencies is not new. The 18th-century Maria Theresa thaler was one of the first international currencies and may be considered something of a model for bitcoin. The denationalised properties of the cryptocurrency have highlighted the advantages of such currencies. [...]

Maria-Theresa thaler, bitcoin and capital flows

London School of Economics—Reinventing Bretton Woods Committee Conference: Innovations in global financial governance and the role of emerging economies

Buenos Aires, 20 March 2018

[...] I hope to leave you with some confidence that cryptocurrencies have a natural role to play in the international economy, that there is a case to change the geography of money, that there is a continuum of types of money and that adoption of cryptocurrencies should be highest where monetary experiences have been bleakest. [...]

Cryptocurrencies challenge the status quo

VOX, with Piroska Nagy-Mohacsi, 15 March 2018

Cryptocurrencies have been the subject of recent attacks by official sector representatives, and the G20 finance ministers will consider regulatory proposals at their next meeting in Buenos Aires. This column argues that while cryptocurrencies present certain risks, they also represent an important innovation that promises to enhance choice and efficiency in monetary transactions. A proportionate, risk-based regulatory approach is required to accommodate differential attitudes and experiences and to avoid stifling innovation and competition. This implies having an open debate before sweeping regulatory action. [...]