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Exchange Rate Cooperation - Essay Example

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The author of this essay "Exchange Rate Cooperation" casts light on the European Community exchange rate cooperation. According to the text, the institution and capital mobility hypothesis provide incomplete explanations of the processes that drive institutional creation…
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Exchange Rate Cooperation
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Exchange Rate Cooperation

Download file to see previous pages... On the other hand, capital mobility hypothesis explains policymakers choice of exchange rate stability and monetary policy autonomy. Additionally, they explain European Community monetary policies congregated within Bundesbanks price stability standard. However, there are weaknesses in the development of the exchange rate cooperation. The weaknesses develop from the creation and evolution of exchange rate institutions and the policymakers’ ability in stabilizing exchange rates within the institutions. In solving these problems, domestic politics concerned with models of monetary policies and bargaining power needs to be developed. Exchange rate cooperation revolves around the dynamics of neoliberal institutions and capital mobility hypothesis. It is vital for the institution and capital mobility to have proper legislative in monetary politics to enable for the stability of exchange rate cooperation.
In the book, Currency of Ideas and Monetary Politics, Kathleen R. McNamara argues that neoliberal consensus theory is not a function that directly raises capital; instead, it is the product of European political leaders’ interpretations of shared ideas (Kathleen 7). Additionally, an example of monetarist paradigm and German policy is used in explaining neoliberal consensus. Kathleen uses paradigms in explaining exchange rate cooperation across the world. Moreover, Kathleen argues that international economy shapes the terrain in which politics unfold. The interpretation of the structure and ideational processes dictate crucial choices of policy content and form. The book cautions against the making of assumptions about effects of economic interdependence on political results without tracing linkages of rising trade and capital flows. This uncertainty has very crucial consequences in the politics of monetary cooperation. Uncertainty obscures the distribution of effects in differences of exchange rate regimes (Kathleen 8). It has the high potential of depolarizing policy process by decreasing societal pressures for specific policies and insulating policymakers from public scrutiny. ...Download file to see next pagesRead More
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