Essays in global imbalances and monetary systems: past and present

In an effort to prevent global imbalances from occurring and persisting across the international monetary system, a number of monetary regimes have been adopted throughout recent history. Yet whilst involuntary constraints have forced policymakers to choose between an external objective or domestic socioeconomic stability when faced with balance of payment difficulties, the same cannot be said for other nations upon posting a positive balance of payments. Consequently, the burden of adjustment has continued to fall on deficit nations. Against this backdrop, the thesis develops a coherent and rigorous theoretical and empirical framework through examining Institutional Practice – the manner in which the daily operations of key institutions, such as the Central Bank and commercial banks are conducted – in order to understand why global imbalances occur and persist across the international monetary system. The central contribution of this thesis is to highlight that although economies are certainly exposed to numerous involuntary constraints when subject to balance of payment difficulties, such challenges can be circumvented in economies with a positive balance of payments. These include instances where legislators attempt to maintain both monetary independence and a heavily managed domestic exchange rate whilst remaining open to global capital flows, otherwise known as the ‘impossible trinity’ (or the monetary trilemma).