The Political Economy and International Relations Policy
Key Words exchange rates, currency policy, monetary policy, international capital mobility, monetary regimes n Abstract The structure of international monetary relations has gained increasing prominence over the past two decades. Both national exchange rate policy and the character of the international monetary system require explanation. At the national level, the choice of exchange rate regime and the desired level of the exchange rate involve distributionally relevant tradeoffs. Interest group and partisan pressures, the structure of political institutions, and the electoral incentives of politicians therefore influence exchange rate regime and level decisions. At the international level, the character of the international monetary system depends on strategic interaction among governments, driven by their national concerns and constrained by the international environment.
A global or regional fixed-rate currency regime, in particular, requires at least coordination and often explicit cooperation among national governments.
INTRODUCTION
The study of international monetary relations was long the domain of economists and a few lonely political scientists. It was routinely argued that, unlike international trade, debt, or foreign investment, exchange rates and related external monetary policies were too technical, and too remote from the concerns of either the mass public or special interests, to warrant direct attention from political economists (Gowa 1988). This was never really accurate, as demonstrated historically by the turbulent politics of the gold standard and more recently by the attention paid to currency policy in small, open economies such as those of
Northern Europe and the developing world. But the tedious predictability of currency values under the BrettonWoods system lulled most scholars into inattention
(exceptions include Cooper 1968, Kindleberger 1970, Strange 1971, Cohen 1977,
Odell 1982, and Gowa 1983).
The collapse of
A global or regional fixed-rate currency regime, in particular, requires at least coordination and often explicit cooperation among national governments.
INTRODUCTION
The study of international monetary relations was long the domain of economists and a few lonely political scientists. It was routinely argued that, unlike international trade, debt, or foreign investment, exchange rates and related external monetary policies were too technical, and too remote from the concerns of either the mass public or special interests, to warrant direct attention from political economists (Gowa 1988). This was never really accurate, as demonstrated historically by the turbulent politics of the gold standard and more recently by the attention paid to currency policy in small, open economies such as those of
Northern Europe and the developing world. But the tedious predictability of currency values under the BrettonWoods system lulled most scholars into inattention
(exceptions include Cooper 1968, Kindleberger 1970, Strange 1971, Cohen 1977,
Odell 1982, and Gowa 1983).
The collapse of