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    Advantages and disadvantages of a single world currency

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    A possible international monetary regime consists of a world central bank conducting monetary policy and issuing a single currency used throughout the world. What would the advantages and disadvantages of such a system be?

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    The advantages and disadvantages of such a scheme are similar to those of "dollarization" which some Latin American countries have used. They accept dollars as if they were domestic currency in order to stabilize their prices. The primary disadvantage for them is loss of control over their money supply. This renders monetary policy worthless. If the country needs to encourage or discourage economic growth, it has lost its most effective tool.

    In the same way in a global scenario, the most powerful countries economically speaking would control monetary policy. They would be ...

    Solution Summary

    Advantages and disadvantages of a single world currency; exchange rate manipulation and seigniorage revenue discussion