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The Political Economy of Money
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The Political Economy of Money

A special issue of Economies (ISSN 2227-7099). This special issue belongs to the section "Macroeconomics, Monetary Economics, and Financial Markets".

Deadline for manuscript submissions: closed (31 October 2024) | Viewed by 11240

Special Issue Editor

Prof. Dr. Stefan Collignon

E-Mail Website
Guest Editor
1. Faculty of Political Sciences, Chulalongkorn University, Bangkok, Thailand
2. London School of Economics and Political Sciences (LSE), London, UK
Interests: economics; public finance; emerging markets

Special Issue Information

Dear Colleagues,

The global economy is in a state of transformation. Emerging market economies are expanding their market share in global trade, and financial networks are becoming more complex. The so-called BRICS countries are seeking to challenge the role of the US dollar as the global anchor currency, but history has shown that replacing an established anchor currency takes an extremely long time. To become a global monetary anchor requires the fulfilment of many conditions. Among the most important are:

  • Monetary stability to ensure that money is a good store of value;
  • A significant share in global trade to ensure that money is an international means of exchange;
  • Exchange rate stability to minimize risks and uncertainties for investors;
  • Free currency convertibility for all balance of payment functions;
  • The security of property titles, the rule of law, and respect for fundamental human rights.

This Special Issue of Economies aims to deepen our empirical and theoretical understanding of the factors driving the international monetary system. It also welcomes papers making proposals regarding the reform of Bretton Woods institutions.

Prof. Dr. Stefan Collignon
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Economies is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1800 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • international monetary system
  • exchange rates
  • monetary stability
  • human rights
  • bretton woods
  • BRICS

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Published Papers (7 papers)

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Research

42 pages, 4104 KiB  
Article
A Game-Theoretic Analysis of the Coexistence and Competition Between Hard and Fiat Money
by Kjell Hausken and Guizhou Wang
Economies 2025, 13(3), 80; https://doi.org/10.3390/economies13030080 - 19 Mar 2025
Viewed by 409
Abstract
This article presents a game-theoretic model analyzing the strategic competition between hard and fiat money, involving a representative player and a consolidated bank (including the central bank). The findings reveal counterintuitive interactions between inflation, interest rates, and monetary policy. When hard money becomes [...] Read more.
This article presents a game-theoretic model analyzing the strategic competition between hard and fiat money, involving a representative player and a consolidated bank (including the central bank). The findings reveal counterintuitive interactions between inflation, interest rates, and monetary policy. When hard money becomes more favorable, through higher interest rates, lower transaction costs, or stronger preferences, the bank responds by withdrawing fiat money, reducing inflation but paradoxically lowering the player’s utility. Conversely, increasing the fiat money interest rate leads to money printing and inflation, benefiting both the player and the bank, but ultimately driving hard money out of existence. The model demonstrates how banks use selective fiat money printing and withdrawal to optimize their holdings at the expense of individual players. This study provides insights into currency competition, inflation control, and strategic monetary interventions, relevant for policymakers, financial institutions, and individuals navigating dual-currency economies. By analyzing 26 key parameters, the research uncovers both intuitive and unexpected economic dynamics, offering a structured approach to understanding the power of fiat money in shaping financial systems. These results highlight the importance of monetary policies, transaction costs, and interest rate adjustments in determining the long-term viability of competing monetary systems. Full article
(This article belongs to the Special Issue The Political Economy of Money)
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17 pages, 658 KiB  
Article
Hayekian Hurdles: Challenges to Cryptocurrency as a Viable Basis for a New Monetary Order
by Luís Pedro Freitas, Jorge Cerdeira and Diogo Lourenço
Economies 2025, 13(1), 12; https://doi.org/10.3390/economies13010012 - 7 Jan 2025
Viewed by 1690
Abstract
The rise of cryptocurrencies over the past decade has promised to challenge the dominance of fiat money systems and reshape monetary policy. However, recent developments, including market volatility and the collapse of key exchanges like FTX, have eroded public trust, raising skepticism of [...] Read more.
The rise of cryptocurrencies over the past decade has promised to challenge the dominance of fiat money systems and reshape monetary policy. However, recent developments, including market volatility and the collapse of key exchanges like FTX, have eroded public trust, raising skepticism of a feasible transition to a crypto-based monetary system. This paper explores why cryptocurrencies have not met the expectations of their proponents, particularly those who saw them as a step towards Friedrich Hayek’s vision for competitive currency issuance. While cryptocurrencies reflect some aspects of Hayek’s model, their instability—especially in Bitcoin-like assets—undermines their role as a reliable alternative to fiat money. The paper also considers how central bank independence and regulatory gaps further hinder the development of a robust cryptocurrency framework. Despite the continued relevance of Hayek’s ideas in today’s monetary landscape, the entrenched structures of modern central banks and the rise of Central Bank Digital Currencies suggest that a decentralised currency order remains unlikely in the near future. Full article
(This article belongs to the Special Issue The Political Economy of Money)
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20 pages, 737 KiB  
Article
Currencies Come and Go, But Employment Always Takes Root: Rethinking External Constraints and Monetary Sovereignty in the Periphery
by Esteban Cruz-Hidalgo, Stuart Medina-Miltimore and Agustín Mario
Economies 2025, 13(1), 9; https://doi.org/10.3390/economies13010009 - 4 Jan 2025
Viewed by 2011
Abstract
This paper explores a development strategy for peripheral economies by advocating for a paradigm shift from traditional economic models that rely on accumulating foreign reserves. It proposes the job guarantee (JG) policy, an automatic stabilizer based on a reserve pool of employed individuals, [...] Read more.
This paper explores a development strategy for peripheral economies by advocating for a paradigm shift from traditional economic models that rely on accumulating foreign reserves. It proposes the job guarantee (JG) policy, an automatic stabilizer based on a reserve pool of employed individuals, as a cornerstone for fostering sustainable and inclusive growth. Grounded in modern monetary theory (MMT), this study critiques the conventional approach that prioritizes external reserves and highlights the potential of MMT in offering a more autonomous development path for developing countries. A systematic review of the literature, using the PRISMA methodology, reveals significant divergence between MMT advocates and critics, particularly regarding monetary sovereignty and the feasibility of implementing macroeconomic policies in peripheral economies. This study emphasizes that while external constraints remain, the MMT perspective calls for flexible exchange rates, low interest rates, and capital controls as part of a broader strategy to reduce dependency on foreign currencies. The proposed approach prioritizes full employment, the mobilization of domestic resources, and structural transformation through policies like import substitution. Although the shift may involve the slower accumulation of capital, it offers a more equitable and stable development path. Ultimately, this analysis underscores the potential of MMT to expand the external constraint and enable sustainable development, despite challenges in implementation and political resistance. Full article
(This article belongs to the Special Issue The Political Economy of Money)
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27 pages, 4875 KiB  
Article
Addition of Subset and Dummy Variables in the Threshold Spatial Vector Autoregressive with Exogenous Variables Model to Forecast Inflation and Money Outflow
by Setiawan Setiawan, Gama Putra Danu Sohibien, Dedy Dwi Prastyo, Muhammad Sjahid Akbar and Anton Abdulbasah Kamil
Economies 2024, 12(12), 352; https://doi.org/10.3390/economies12120352 - 19 Dec 2024
Viewed by 919
Abstract
The TSpVARX model can be used in inflation and money outflow forecasting by accommodating the reciprocal relationship among endogenous variables, the influence of exogenous variables, inter-regional linkages, and the nonlinearity of the relationship between endogenous and predetermined variables. However, the impact of some [...] Read more.
The TSpVARX model can be used in inflation and money outflow forecasting by accommodating the reciprocal relationship among endogenous variables, the influence of exogenous variables, inter-regional linkages, and the nonlinearity of the relationship between endogenous and predetermined variables. However, the impact of some events, such as Eid al-Fitr and fuel price adjustments, still cannot be accommodated in the TSpVARX model. This condition causes inflation and money outflow forecasting using TSpVARX to be unsatisfactory. Our study is to improve the forecasting performance of the TSpVARX model by adding subset and dummy variables. We use a 12th lag subset variable to capture seasonal effects and a dummy variable to represent fuel price changes. These additions enhance the model’s accuracy in forecasting inflation and money outflow by accounting for recurring patterns and specific events, like fuel price changes. Based on the RMSE values of the training and testing data, we can conclude that forecasting inflation and money outflow using TSpVARX with the addition of subset and dummy variables is better than the regular TSpVARX. The inflation and money outflow forecasting generated after the addition of subset and dummy variables are also more fluctuating as in the movement of the actual data. Full article
(This article belongs to the Special Issue The Political Economy of Money)
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36 pages, 488 KiB  
Article
Economic and Political Determinants of Sovereign Default and IMF Credit Use: A Robustness Assessment Post 2010
by Lina Maddah, Hassan Sherry and Hussein Zeaiter
Economies 2024, 12(7), 181; https://doi.org/10.3390/economies12070181 - 9 Jul 2024
Viewed by 1693
Abstract
According to the IMF, the current public debt makes up nearly 40 percent of the global debt, marking the highest share since the mid-1960s. Despite the vast research on alarming levels of sovereign default, the literature remains inconclusive. This paper investigates macroeconomic, financial, [...] Read more.
According to the IMF, the current public debt makes up nearly 40 percent of the global debt, marking the highest share since the mid-1960s. Despite the vast research on alarming levels of sovereign default, the literature remains inconclusive. This paper investigates macroeconomic, financial, and political determinants of IMF credit use in the post-2010 era. The main contribution of our study lies in its temporal analysis as we investigate how the robustness of different factors has evolved. By utilizing an extensive dataset on 216 countries over the period of 2010–2021 and employing a variant of the Extreme Bounds Analysis (EBA) method, our study reveals that fluctuations in the IMF credit to external debt ratio can be attributed to changes in the total reserves to external debt ratio, where this relationship is statistically significant and reliable. However, high political risks seem to no longer affect the IMF’s decision, post 2010. Furthermore, our findings demonstrate that excluding countries with low debt arrears strengthens the results’ robustness. These findings contribute to a better understanding of the complexities surrounding IMF credit use in the contemporary global economic scene and offer new standpoints on the Fund’s lending choices. Full article
(This article belongs to the Special Issue The Political Economy of Money)
27 pages, 6525 KiB  
Article
The Tale of Two Economies: Inflationary Dynamics in the Euro Area and the US in the Context of Uncertainty
by Stefan Collignon
Economies 2024, 12(7), 157; https://doi.org/10.3390/economies12070157 - 21 Jun 2024
Viewed by 1248
Abstract
In recent years, the global economy has been hit by a sequence of severe shocks that affected the two largest economies, the USA and the Euro Area, severely. Uncertainties about the future abound. While the challenges are similar for both economies and the [...] Read more.
In recent years, the global economy has been hit by a sequence of severe shocks that affected the two largest economies, the USA and the Euro Area, severely. Uncertainties about the future abound. While the challenges are similar for both economies and the policy tools resemble each other, they apply to different economic landscapes. What can they learn from each other? This paper looks at the basic structural facts, the nature of uncertainty shocks, and the efficiency of policy tools in the two economies. The key to understanding recent developments is uncertainty. This paper argues that the channel through which uncertainty influences inflation, wage cost, and unemployment is the markup firms charge to cover their cost of capital. While the measurements of uncertainty are uncertain, adding a proxy for uncertainty can improve the estimates of the basic New Keynesian model. The Federal Reserve Bank has been more successful because it operates in a more integrated capital market. In the Euro Area, uncertainty is higher than in the US and this could make disinflation in Europe more painful in terms of unemployment. Full article
(This article belongs to the Special Issue The Political Economy of Money)
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14 pages, 774 KiB  
Article
Exploring the Dynamic Nexus between Cross-Border Dollar Claims and Global Economic Growth
by Constantinos Alexiou, Sofoklis Vogiazas and Alex Benbow
Economies 2024, 12(3), 69; https://doi.org/10.3390/economies12030069 - 15 Mar 2024
Cited by 1 | Viewed by 2280
Abstract
This paper addresses the role of the U.S. dollar in fostering global economic growth during the post-war period. The existing literature lacks a comprehensive understanding of the true implications of the U.S. dollar’s status as a reserve currency and a dearth of studies [...] Read more.
This paper addresses the role of the U.S. dollar in fostering global economic growth during the post-war period. The existing literature lacks a comprehensive understanding of the true implications of the U.S. dollar’s status as a reserve currency and a dearth of studies examining its impact. In this study, we explore the dynamic long-run and short-run relationships between cross-border U.S. dollar claims, global GDP, and global trade while gauging the impact of the Global Financial Crisis (GFC) and the COVID-19 pandemic. In doing so, we use ARDL methodology for a data set that spans the period of 1980 to 2022. The estimation results reveal a robust long-run relationship between U.S. dollar claims, global GDP and global trade and no clear evidence of asymmetric effects. Our findings are of great significance for monetary authorities, emphasising the need for a nuanced understanding of the implications of the U.S. dollar’s conducive role in shaping global economic dynamics and fostering growth. Full article
(This article belongs to the Special Issue The Political Economy of Money)
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