On the International Monetary System (IMS): A case of background injustice and parasitic exploitation

Thesis

In this thesis I discuss three stylized scenarios of the International Monetary System (IMS): one with floating exchange rates, one with fixed exchange rates and one with closed capital markets. Within the first scenario, I identify two problems of background injustice: the problem of monetary spillovers and the problem of currency speculation. The first problem happens because exchange rates are relative to one another, hence, when the central bank of a country applies monetary policy, it also changes the exchange rate of all other countries vis-à-vis this country. In order to address this problem, I offer a Limited Regressiveness Principle (LRP) and argue for the creation of a global fund. In order to address the second problem, I offer a framework of parasitic exploitation, which includes three conditions of build in mechanisms, vulnerability, and non-proportionality. I argue that the case of currency speculation, is not only a problem of background injustice, but also a case of parasitic exploitation. Then, I discuss the scenario of fixed exchange rates. I consider two stylized but historical cases, the Gold Standard and the Reserve Currency Standard. I also consider a hybrid case, the case of the Eurozone. I argue that the framework of parasitic exploitation can be extended to the stylized fixed scenarios. However, I suggest that both the principles and the responsibilities that arise in the fixed cases are different from those that arise in the general floating case. Finally, I address the case of closed capital markets, or financial autarky, such as the system that existed during Bretton Woods. I argue that a generally open system with embedding institutions - which may include non-extensive capital controls - is better than a completely closed scenario of extensive capital controls, such as the one that existed during Bretton Woods.

Authors: Guajardo Ortega, CC

• Type of award: DPhil
• Level of award: Doctoral
• Awarding institution: University of Oxford
• Language: English
• Keywords: Central Banks; Parasitic Exploitation; Financial Crises; Background Injustice; Foreign Exchange Market; International Monetary System