¹Robert Bendheim Chair in Economic and Financial Policy, Graduate School of Business Administration, Fordham University, 113 W 60 St, New York, NY 10023-7484, USA

^*This paper was originally presented as the 25th Annual Lecture of the Geneva Association, in Washington, DC, 29 September 2001.

Abstract

The lecture explores causes and consequences of the declining usefulness of the separate currency denominations maintained by that large number of small open economies whose currencies play little or no role in international finance. So far, official multinational entities capable of taking up new threats to international financial stability, like the Group of Seven (G7), the G10 Finance Ministers and Central Bank Governors, the International Monetary and Financial Committee (IMFC) comprising 24 IMF Governors, and the Financial Stability Forum (FSF), have given little visible attention to these market-driven tendencies toward currency consolidation. As a result, there is scant official guidance on what to do about these tendencies so as to contribute to greater international financial stability in a multilateral framework. More such attention is overdue because the intermediate stages of currency competition in an emerging-market country in which there is more than one monetary standard in domestic use carry high risks to the stability of that country and its financial sector.