ABSTRACT
At the beginning of the 1970s the OECD countries were on a de facto Dollar Standard, in which the US selected its monetary policy with a view to domestic stability and other countries pegged to the dollar, with the right to change their peg at their unilateral discretion. By 1973, the Dollar Standard had collapsed, giving way to a regime of floating exchange rates coupled with national money-supply targets, a regime long advocated by Friedman (1953, 1968). Since the Plaza Agreement of September 1985, however, the US has made the external value of the dollar an explicit target of policy. The coordination of international macroeconomic policies was sought in order to help secure a reduction of its external deficit. These developments prompt two questions – first, is a change in the international monetary system really called for rather than simply a change in, for example, US fiscal policy; and, second, if so, what are the alternatives?
