Regional Exchange Rate Arrangements The European Experience

• Published in: Regional Financial Cooperation p. 107
• Main Author: CHARLES WYPLOSZ
• Format: Book Chapter
• Language: English
• Published: United States Brookings Institution Press and Economic Commission for Latin America and the Caribbean (ECLAC) 29-08-2007; Brookings Institution Press
• Subjects: Applied economics; Bilateralism; Capital controls; Capital mobility; Currency; Econometrics; Economic disciplines; Economic indicators; Economic inflation; Economic policy; Economics; Exchange rate regimes; Exchange rates; Finance; Financial economics; Fiscal policy; Foreign exchange; Foreign policy; Government; Inflation rates; International economics; International finance; International trade; Macroeconomics; Monetary policy; Monetary unions; Money; Political integration; Political processes; Political science; Politics; Price fluctuations; Price levels; Public administration; Public policy; Real exchange rates; Regional exchanges; Stock exchanges
• ISBN: 9780815764199; 0815764197

Regional arrangements generally remain controversial. They are sometimes seen as a threat to multilateralism, and multilateralism is, in principle, first best. The argument for multilateralism and against regionalism is best developed for trade arrangements: regional agreements have a trade-creating effect within the region but also a trade-diverting effect in the rest of the world, and for that reason could quite possibly reduce overall welfare. Yet the threat is not substantiated by historical developments over the past decades. Baldwin develops a convincing domino theory according to which regional trade arrangements prompt multilateral arrangements as those left out face additional incentives to