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The Economics of Common Currencies (Collected Works of Harry Johnson) by Alexander K. Swoboda, Harry G. Johnson

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Chapter 8

POLICY CONFLICT, INCONSISTENT GOALS, AND THE CO-ORDINATION OF ECONOMIC POLICIES*

ALEXANDER K. SWOBODA

Graduate Institute of International Studies

Simultaneous achievement of internal and external balance by the world’s – or a currency area’s – economies constitutes a major problem for economic policy. This problem must be solved if international economic disintegration is to be avoided. It is particularly acute when increasing economic integration is pursued under a regime of fixed exchange rates – as it would be under a scheme of regional monetary integration.

Indeed, the optimum currency-area question was originally raised in this context: the benefits of having a single currency are balanced against the internal adjustment costs ...

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