The first papers deals with:


Exchange rates and the choice of monetary policy regimes -Fewer


monies better monies,by Rudi Dornbusch.


A century ago gold was the standard for civilization.Gradually this had


become international and countries if they were not on gold,at least


they were on sterling or the dollar.After world war one all that fell


apart in the great depression with capital controls,devaluation and


discretionary central banking.

Exchange rates and the choice of monetary policies.

After the great inflation of the 1970's,extreme monetary experiences in


most developing nations,the past 20 years have changed monetary


management fundamentally.Emerging economic trend is for


independent central banks with transparency and some inflation


target.Emerging trend is also towards monetary integration.In Europe


they have got the EMU.


In Americas progress on monetary integration is far more


haphazard.Europe and Americas independence makes political


integration an uninteresting issue.A national currency as opposed to a


hard dollar peg,is seen as an unquestioned plus for reasons to be


discovered.


In Asia the discussion of monetary arrangements is picking up at the


(1)


behest of Japan.

(Eiji Ogawa and Takatoshi Ito, 2000).


Arguments against currency board arrangements


1.Sovereignty is beyond discussion because of the quality of money


and the emerging economies.


2.As far as loss of seigniorage is a critical issue for public finance but


any kind of stability-oriented monetary policy will yield some bonous


but currency boards and dollarization presumably commands the


highest bonus.


3.As far as the monetary policy is concerned,the external balance not


the local central bank will determine interest rates so this issue has


very little imporatance.


4.There is a concern about loss of the leader of last resort.


5.Another argument in questioning currency boards is fiscal


preparedness.How a discretionary monetary and exchange rate policy


can accomodate a bad fiscal situation better than a fixed rate.The


savings on debt service from lower interest rate under a currency board


should compensate for the loss of seignorage.


Exchange rate issue


Author argues that disturbance in price levels due to fixed exchange


rate could be tackled by financing.


For relative price adjustments partial...