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Money on the Move

Money on the Move: The Revolution in International Finance since 1980

Robert Solomon
Copyright Date: 1999
Pages: 224
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  • Book Info
    Money on the Move
    Book Description:

    The international monetary system has changed radically in the last twenty years. Capital, information, goods, and services move around the globe with unprecedented ease. Countries from the former communist bloc have joined the system. Europe is on the verge of monetary union. Financial crises in East Asia and Mexico have rocked the world economy. In this book, Robert Solomon--author of the definitive history of the monetary order between 1945 and 1981--presents the first comprehensive history of these and other aspects of this revolution in international finance. Authoritative, accessible, and elegantly written, the book will be indispensable for anyone who wishes to understand how today's international monetary system works.

    Solomon begins with the spectacular rise and subsequent decline of the foreign exchange value of the U.S. dollar in the 1980s. He covers the debt crisis of developing countries in the 1980s. He explores the shift from central planning to market economies in many countries in the 1990s and explains the origins, implications, and problems of the move to a single European currency. Solomon examines in detail the striking increase in the mobility of capital--paying particular attention to the costs and benefits for developing countries, and to the role of capital mobility in the Mexican crisis of 1994 and the Asian crisis that began in 1997. In the book's final chapter, Solomon provides an overview of the international monetary system and considers how it might evolve in the future. In this section, he focuses on the key subjects of balance-of-payments adjustments, supply of reserves, and stability. He also evaluates a variety of much-debated policy instruments, including inflation targeting, currency boards, target zones for exchange rates, free-floating exchange rates, the Tobin tax, macroeconomic policy coordination, and special drawings rights.

    Throughout, Solomon relates developments in the international monetary system to macroeconomic conditions in the countries involved--arguing that it is impossible to understand one without understanding the other. As a clear, thorough, and unusually perceptive account of global finance and monetary economics in the late twentieth century, Money on the Move will be vital reading for economists, policymakers, and general readers.

    eISBN: 978-1-4008-2285-0
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Preface and Acknowledgments
    (pp. vii-xii)
  4. List of Abbreviations and Acronyms
    (pp. xiii-2)
  5. CHAPTER 1 The Wide-Ranging Dollar, 1980–1990
    (pp. 3-33)

    Policymakers and international economists were preoccupied with two principal problems in the 1980s: wide movements of exchange rates and the debt crisis of developing countries. This and the next chapter deal with those topics.

    Although there had been much exchange-rate instability in the 1970s, including a depreciation of the dollar of near-crisis proportions in 1977–78, the persistent and sizable rise of the dollar in the first half of the 1980s presented unprecedented problems (figure 1.1). The appreciation of the dollar and the ballooning of the U.S. balance-of-payments deficit were, of course, related to the policies pursued both in the...

  6. CHAPTER 2 The Developing-Country Debt Crisis
    (pp. 34-48)

    The 1980s became known as the “lost decade” for a number of developing countries, mainly in Latin America, as they struggled to service heavy debts in the face of a severe falloff in private inflows of capital—principally bank loans. Per capita GDP actually declined from 1980 to 1990 for the most heavily indebted countries. In the words of John Williamson: “As the decade ended, the region remained mired in stagflation, burdened by foreign debt, disfigured by the world’s most inegalitarian income distribution, and crippled by a continuing lack ofconfidence on the part not only ofits foreign creditors but also...

  7. CHAPTER 3 Economic and Monetary Integration in Europe
    (pp. 49-96)

    Much happened in the European Union (EU) during the period covered by this book, including the change in its name from the European Community (EC) and its enlargement as new members came in. At the same time, EU became more integrated both economically—under the single market—and then monetarily as steps were taken toward Economic and Monetary Union (EMU). The European Monetary System (EMS) had been established nine months before our story begins. It went through various phases and was accompanied by a convergence of inflation and interest rates and increasing stability of exchange rates among its members. It...

  8. CHAPTER 4 Economies in Transition: International Effects
    (pp. 97-107)

    An appropriate way to introduce this subject is with two quotations—the first from an article published by Albert Hirschman in 1990:

    Social scientists, historians, and political observers in general agree on one point about the Eastern European revolutions of 1989: no one foresaw them. The collapse of Communist power in Eastern Europe, the fall of the Berlin Wall and the reunification of Germany, the implosions in the Soviet Union—the end of the cold war, in short—all these developments unfolded in a remarkably short time and as a huge surprise to “experts” and ordinary television viewers alike.¹


  9. CHAPTER 5 The 1990s: Capital Mobility and Its Effects
    (pp. 108-137)

    This chapter takes a worldview with emphasis on the escalation of international capital mobility. It focuses especially on the causes and effects—sometimes troublesome—of the large and unanticipated increase in capital flows to developing countries in the 1990s. It also looks at movements of the exchange rates of major industrial countries in the 1990s as related to their macroeconomic performance and policies and the mobility of capital.

    The 1990s witnessed a significant acceleration in the growth of developing countries—with favorable economic effects on the rest of the world—and a blurring of the distinction between many of them...

  10. CHAPTER 6 The Present and Future of the System
    (pp. 138-168)

    This final chapter provides an overview of the international monetary system as a whole as it functions today and as it might evolve in the future. First it is useful to take a broad look at how the world has changed in the years since 1980. That is one way of viewing the present status of the system.

    Then we turn to the three traditional features of an international monetary system: balance of payments adjustment, supply of reserves, and stability. Adjustment involves the working of the regime of floating exchange rates and proposals for its reform, including target zones and...

    (pp. 169-176)
  12. Notes
    (pp. 177-200)
  13. Index
    (pp. 201-210)