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March/April 1989, 
Vol. 71, No. 2
Posted 1989-03-01

Money and the International Monetary System

by H. Robert Heller

This article is the 1989 Homer Jones Memorial lecture presented by H. Robert Heller of the Board of Governors of the Federal Reserve System. In his lecture, Dr. Heller examines the role of money and monetary stability and the choice between a national or an international monetary standard. Dr. Heller begins by discussing the importance of both money that is broadly accepted as a means of payment and the existence of a stable price level for economic and political freedom. He notes that monetarists and “internationalists” generally agree on the importance of human freedom; however, they differ in terms of the type of monetary standard they believe will achieve their goal. In his view, monetarists can be characterized as advocating a national monetary standard with flexible exchange rates and little, if any, need for international policy coordination. Internationalists, in contrast, advocate a global monetary standard; they view the nation-state as a political construct with limited economic importance. Dr. Heller then introduces some considerations that he believes can be used to help in deciding which monetary system will be more useful; among these are the provision of a stable financial environment and price stability within an economically and financially integrated system. He concludes by stating that, as global integration of economic and financial markets proceed and as political interdependence increases, monetary integration will increase as well.

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