Globalization and the International Monetary Community Essay -- Econom

Executive Summary Our world is steadily shrinking. Technology is building bridges over the barriers of distance, language, and culture. It’s a process called globalization, and it is changing the way we live. Financial institutions haven’t been immune to the effects of this change. In fact, the international nature of financial institutions makes them particularly vulnerable to change. This paper addresses three issues caused by the globalization of the international monetary community. First this paper examines the success of the Euro, and the implications for the formation of a global currency. Then this paper looks at the issue of devaluation, and by comparing successful and unsuccessful devaluations tries to determine what factors make a devaluation work. Finally this paper will look at the trend toward dollarization, and whether or not dollarization is the best solution for struggling economies. This paper contends that the power of globalization is forcing the international monetary community to address these issues. The success of the Euro makes a global currency seem like a logical step in the evolution of currency, even though sentimental attachment to national currency would make a global currency unpopular. Devaluation of national currency is only effective for nation with substantial foreign investment and high technology exports. Dollarization solves many problems for struggling economies in the short term, but at some point these nations should consider joining a Multi-Lateral Monetary Union. These changes and more are reforming the way we think about money. While some of the solutions proposed here will only become feasible years in the future, some of the problems discussed affect us t... ...Peiers, Bettina. â€Å"Dollarization in Developing Countries: Rational Remedy or Domestic Dilemma?†. Contemporary Economic Policy. Jul96, Vol. 14 Issue 3, p30. Meyer, L.H. "The Euro in the International Financial System." Federal Reserve Bank of Minneapolis, Vol. 25-27, Issue 2, p58. O'Mara, Richard. â€Å"Argentina's deep, empty pockets†. Christian Science Monitor. 4/2/2002, Vol. 94 Issue 89, p9. â€Å"Ring in the New†. Economist. 1/5/2002 Vol. 362 Issue 8254, p22. Schulmeister, Stephan. â€Å"Globalization Without Global Money: The Double Role of the Dollar as National Currency and World Currency†. Journal of Post Keynesian Economics, Spring2000, Vol. 22 Issue 3, p365. â€Å"The Myth of Eurocreep†. Economist. 1/5/2002, Vol. 362 Issue 8254, p43. von Furstenberg, George. â€Å"A Case Against U.S. Dollarization.† Challenge. Jul/Aug2000, Vol. 43 Issue 4, p108.