Technical aspects of a payments union

Abstract

In Chapters 2 and 3 I argued the substantive case for establishing a payments union for the PETs, and the rest of Eastern Europe, the Soviet Union, and Yugoslavia under some conditions. This proposal can be credible only if details of the conceptualization and functioning of such a union are cogently addressed. This chapter first looks at the salient features of such a payments union, making the connection with the EPU’s example drawn in broad brush strokes in Chapter 2. Next it examines one basic problem associated with the ongoing or desired economic reforms and the emerging current-account problems. Section 3 points out several technical issues and how they could possibly be resolved. Details regarding minimum capital requirements of a regional payments union under various assumptions on modalities of settlements and participants are discussed next. The issue of macroeconomic surveillance is, of course, a critical one, and for that reason I defer it to Chapter 6. In the last section, I deliberate on whether it would be wise to conceptualize a CEPU without involvement of the Soviet Union or its successor republics for that matter.