An institutional analysis of some monetary issues in developing economies

Strachman, Eduardo and Vasconcelos, Marcos Roberto (2001): An institutional analysis of some monetary issues in developing economies.

Abstract

The paper shows the difficulties that the increasing international mobility of capitals set to the execution of monetary policy in the development countries. In modern capitalist economies, more than ever, money should be viewed as an institution. Therefore, it is first necessary to understand what are institutions (being money one of them) in order to comprehend the institutional and theoretical prerequisites to monetary policies and monetary stability. In this discussion, we emphasize the challenges that the monetary and financial opening up of many national markets impose for the execution of economic policies. In this sense, we also examine some of the specific institutional prerequisites to monetary stability in the development countries, because of facts as the inconvertibility of their currencies, and the frequent inconsistency of their fiscal, monetary and exchange policies, etc. We try to demonstrate that those institutional difficulties are responsible for the growing appeal of proposals to a complete abandonment of some national currencies, or for the adoption of currency boards in which the policymakers renounce to their power to decide about the liquidity level of their economies, in spite of the formal existence of their national currencies. Finally, we present some suggestions to the solution of the referred problems.

• Item Type: MPRA Paper
• Language: English
• Keywords: Institutions; Money; Developing Countries
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy > O23 - Fiscal and Monetary Policy in Development; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems ; Standards ; Regimes ; Government and the Monetary System ; Payment Systems; O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy > O24 - Trade Policy ; Factor Movement Policy ; Foreign Exchange Policy

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