Monetary Regime Transformations.

• Author: Darin, Robert M.

Monetary Regime Transformations details several monetary regime transformations in the twentieth century. The book is a collection of twenty papers focusing on a wide variety of monetary changes in Europe and the United States. The anthology gives thorough and insightful explanations for the reasons behind the changes in monetary regimes, and it also analyzes the economic effects of the reforms. Systems of fixed exchange rates receive the most emphasis within the book, and the conflicting domestic and international goals which can destabilize fixed exchange rate systems are well documented.

Two lessons resonate throughout the episodes in the book. First, a successful monetary regime transformation must be credible. If participants in a monetary regime do not believe a transformation is going to be effective, the reform is often doomed to failure. Credibility in part rests upon the internal consistency of a policy; ending inflation with a tight monetary policy will be undermined by a simultaneous fiscal expansion. The second lesson is that it is very difficult for any country to maintain monetary stability without international coordination. In almost all of the historical periods examined in the book, problems arose when countries engaged in noncooperative behavior, whether it be gold-hoarding, mercantilism or unrestrained monetary expansion. Unfortunately, the book has few insights as to how these coordination problems can be overcome, but perhaps this is a question for the political scientist rather than the economist.

One minor fault in the collection is that it is slightly Eurocentric in its focus. While it is true that Britain had a greater role in international affairs before World War II and thus warrants more focus in this time period, expanded coverage of U.S. monetary developments in the post-war period would improve the scope of the book.

The book is perhaps most adept at analyzing systems of fixed exchange rates. A paper by R. G. Hawtrey examines the gold standard as it existed before 1914, and the paper provides a good introduction to both the mechanics and the inherent contractionary tendencies of the pre-war gold standard. In this system when one country contracted its money supply others were forced to do the same or they risked losing their gold reserves. Conversely, countries were less likely to expand their money supplies when they had a surplus of gold reserves. International cooperation often failed to stem this...