The Debate on the International Monetary System
Prepared by Isabelle Mateos y Lago, Rupa Duttagupta, and Rishi Goyal1
Authorized for distribution by Reza Moghadam
November 11, 2009
"...With the world divided into a camp of major currencies that float freely and permit the free flow of capital, and another camp with varying degrees of control over exchange rates and cross-border flows, today’s IMS is something of a “non-system.” A key notion in this setup is that of reserve asset: so long as a country fixes or manages its exchange rate, it needs a liquid international asset of stable value to intervene with. Since the demise of real assets like gold as monetary anchors, the U.S. dollar has been the world’s principal reserve asset. For the most part, that system has worked reasonably well—except when it has not...."