Theoretical perspectives of monetary integration

Instability in international monetary arrangements has been a fact of life for policy makers since the breakdown of the Bretton Woods agreements in the early 1970s.The 1980s in particular were characterized by an exceptional misalignment of the major currencies. The decade saw massive capital flight towards the United States and other industrialized countries from the developing world, particularly after the debt crises and the cutting-off of new loans. Macroeconomic policies improved in the majority of developing countries in the 1990s, but the expected growth benefits failed to materialize, at least to the extent that many observers had forecast. In addition, a series of financial crises severely depressed growth and worsened poverty (World Bank, 2005:95). The enormous costs of the financial crises in Asia, and in Argentina and Brazil in Latin America at the end of the 1990s/beginning of 2000s drove home the importance of stability.

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