Open Economies Review

, Volume 20, Issue 3, pp 339–358 | Cite as

Resurrecting Keynes to Stabilize the International Monetary System

  • Pietro AlessandriniEmail author
  • Michele Fratianni
Research Article


We adapt the basic principles of the Keynes Plan and argue for the creation of a supranational bank money (SBM) that would coexist along side national currencies and for the establishment of a new international clearing union (NICU). These principles remain timely because the fundamental causes of the instability of the international monetary system are as valid today as they were in the early forties. The new supranational money would be created against domestic earning assets of the Fed and the ECB and its quantity would be demand-driven. Our proposal is not an agreement on exchange rates, which while possible is not essential to the functioning of the SBM. NICU would not hold open positions in assets denominated in national currency and consequently would not bear exchange rate risk. NICU would be more than an office recording credit and debit entries of the supranational bank money. The financial tsunami that hit the world economy in 2007–2008 provides a unique opportunity for a coordinated strategy.


Keynes Plan External imbalances Exchange rates International monetary system Key currency Supranational bank money 

JEL Classification

E42 E52 F33 F36 


  1. Alessandrini P (1977) Keynes e la politica monetaria internazionale. In: Faucci R (ed), Keynes nel pensiero e nella politica economica, Feltrinelli, Milano, revised english edition (2007) “Keynes and the International Monetary Policy”, Department of Economics, Università Politecnica delle Marche, Ancona, mimeoGoogle Scholar
  2. Bernanke BS (2005) The global saving glut and the U.S. current account deficit, speech delivered for the Sandridge Lecture at the Virginia Association of Economists, Richmond, March 10; available at
  3. Bernanke BS (2007) Global imbalances—recent developments and prospects. Bundesbank Lect Berl 11(September)Google Scholar
  4. Boughton J (2001) Silent revolution: the International Monetary Fund 1979–1989. International Monetary Fund, Washinton, D.CGoogle Scholar
  5. Caballero RJ, Farhi E, Gourinchas P-O (2006) An equilibrium model of “global imbalances” and low interest rates, NBER Working Paper N. 11996 (January)Google Scholar
  6. Committee of Twenty (1974) International monetary reform. International Monetary Fund, Washington, D.CGoogle Scholar
  7. Costabile L (2006) Current Global Imbalances and the Keynes Plan, Working paper N.1, Dipartimento di economia, Università Federico II, NapoliGoogle Scholar
  8. Despres E, Kindleberger CP, Salant WS (1966) The dollar and world liquidity: a minority view. The Economist, February 5, pp. 526–529Google Scholar
  9. Dooley MP, Folkerts-Landau D, Garber P (2003) An essay on the revived Bretton Woods System, NBER Working Paper N. 9971Google Scholar
  10. Eichengreen B (1989) Hegemonic stability theories of the international monetary system. In: Cooper RN, Eichengreen B, Henning CR, Holtham G, Putnam RD (eds) Can nations agree? Brookings Institution, Washington, D.CGoogle Scholar
  11. Eichengreen B (2000) From benign neglect to malignant preoccupation: U.S. balance-of-payments policy in the 1960s. In: Perry GL, Tobin J (eds) Economic events, ideas, and policies: the 1960s and after. Brookings Institution, Washington, D.CGoogle Scholar
  12. Eichengreen B (2007) Global imbalances and the lessons of Bretton Woods. MIT, BostonGoogle Scholar
  13. Frankel J (2006). Global imbalances and low interest rates: an equilibrium model vs. disequilibrium reality. Available at
  14. Fratianni M, von Hagen J (1992) The European monetary system and European monetary union. Westview, OxfordGoogle Scholar
  15. Gourinchas P-O, Rey H (2005) From world banker to world venture capitalist: US external adjustment and the exorbitant privilege, NBER Working Paper N. 11563 (August)Google Scholar
  16. Grubel HG (ed) (1963). World monetary reform. plans and issues. Stanford: Stanford University PressGoogle Scholar
  17. Hausmann R, Sturzenegger F (2005) Global imbalances or bad accounting? The missing dark matter in the wealth of nations, December, Available at
  18. Higgins M, Klitgaard T, Tille C (2006) Borrowing without debt? Understanding the U.S. International Investment Position, Federal Reserve Bank of New York, Staff Report n. 271 (December).Google Scholar
  19. Horsefield JK (ed) (1969) The international monetary fund. 1945–1965. Twenty Years of international monetary cooperation. International Monetary Fund, Washington, D.CGoogle Scholar
  20. International Monetary Fund (2008) World Econ Outlook (November)Google Scholar
  21. James H (1996) International monetary cooperation since Bretton Woods. Washington, D.C: International Monetary Fund, Oxford: Oxford University PressGoogle Scholar
  22. Kenen PB (1981) The analytics of a substitution account. BNL Quarterly Review 139:403–426Google Scholar
  23. Keynes JM (1930) A treatise on money, in The collected writings of John Maynard Keynes, volume VI, Royal Economic Society. London: MacMillan, 1971Google Scholar
  24. Keynes JM (1936) The general theory of employment, interest and money, in the collected writings of John Maynard Keynes, volume VII, royal economic society. London: MacMillan, London, 1973Google Scholar
  25. Keynes JM (1943) Proposals for an international clearing union, British government publication, Cmd.6437, London (April). Reprinted in J. Keith Horsefield ed. (1969), volume III. Documents: 19–36Google Scholar
  26. Kindleberger CP (1973) The world in depression, 1929–1939. University of California Press, BerkeleyGoogle Scholar
  27. Kindleberger CP (1979) Is symmetry possible in international money? In: Greenfield HI, Levenson AM, Hamovitch W, Rotwein E (eds) Theory for economic efficiency. Essays in honor of Abba P. Lerner. MIT, LondonGoogle Scholar
  28. Machlup F (1966) Plans for reform of the international monetary system, chapter XIV (pp. 282–366) in International Monetary Economics. London: George Allen & Unwin. Revised edition of Special Papers in International Economics, n.3, March 1964. Princeton, N.J.: Princeton University PressGoogle Scholar
  29. McKinnon RI (1974) A new tripartite monetary agreement or a limping dollar standard? Essay in international finance N. 106. Princeton University Press, Princeton, NJGoogle Scholar
  30. McKinnon RI (1996) The rules of the game. MIT, Cambridge, MassGoogle Scholar
  31. Micossi S, Saccomanni F (1981) The substitution account: the problem, the techniques and the politics. BNL Quarterly Review 137:171–189Google Scholar
  32. Moggridge D (ed) (1980) Activities 1940–1944: shaping the post-war world: the Clearing Union, in The Collected Writings of John Maynard Keynes, Volume XXV, Royal Economic Society. Cambridge: MacMillan and Cambridge University Press.Google Scholar
  33. Mundell R (1968) International economics. MacMillan, LondonGoogle Scholar
  34. Mundell R (2005) The case for a world currency. J Policy Model 27:465–475. doi: 10.1016/j.jpolmod.2005.04.012 CrossRefGoogle Scholar
  35. Obstfeld M, Rogoff K (2005) Global current account imbalances and exchange rate adjustments. In: Brainard W, Perry G (eds) Brookings Papers on Economic Activity, 1: 67–146Google Scholar
  36. Rossi S (2007) The monetary-policy relevance of an international settlement institution: the Keynes plan 60 years later. In: Giacomin A, Marcuzzo MC (eds) Money and markets: a doctrinal approach. Routledge, LondonGoogle Scholar
  37. Roubini N, Setser B (2005) Will the Bretton Woods 2 regime unravel soon? The risk of a hard landing in 2005-2006, Available at
  38. Triffin R (1960) Gold and the dollar crisis. Yale University Press, New HavenGoogle Scholar
  39. U.S. Bureau of Economic Analysis (2008). U.S. International Transactions,
  40. Yeager LB (1968) International monetary relations. Theory, history, and policy. Harper & Row, New YorkGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.Department of Economics and MoFiRUniversità Politecnica delle MarcheAnconaItaly
  2. 2.Kelley School of BusinessIndiana UniversityBloomingtonUSA

Personalised recommendations