Streaming Media
Media Type
Keynote Address
Publication Date
1-14-2002
Description
I agree with Prof. Mundell that economic theory does suggest that the best monetary system would involve the use of a single currency. The idea of the existence of money is to facilitate exchange and thus a single unit of account and medium of exchange is preferable over several such units. A single currency also reduces the transaction costs, search costs, computational costs and thus enhances the efficiency of resource use. On this basis, it is safe to deduce that the justification for a system of national currencies freely convertible at fixed exchange rate is self-evident. Empirically, the European Union (EU) has successfully completed its long journey towards a single currency area. Unlike the United States where the political sovereignty by states is surrendered to a nation-state under an agreed constitutional and institutional arrangement, the case of EU is quite different. The nation-state members of EU have chosen to maintain their political sovereignty intact and only surrendered their monetary policy setting powers to a common entity. This journey towards the single currency has only been possible when certain pre-conditions defined precisely and quantitatively were fulfilled by each of the participating countries.
Recommended Citation
Husain, I. (2002). Comments by Governor State Bank of Pakistan on the Paper Debt, Growth, Poverty in International Monetary System. Retrieved from https://ir.iba.edu.pk/faculty-research-talks-speeches/121
Notes
Comments by Governor State Bank of Pakistan on the paper Debt, Growth, Poverty in International Monetary System by Nobel Laureate Prof. Robert A. Mundell at the Annual Conference of Pakistan Society for Development Economists at Islamabad on January 14, 2002.