THE PAKISTAN DEVELOPMENT REVIEW
Theoretical Problems of the International Monetary System
Since 1958, international economists have been greatly concerned with the problem of international monetary reform. Research and writing on this problem has taken one or other of two broad forms. Those economists most concerned with policy have concerned themselves with emphasizing the need for inter¬national monetary reform and propounding workable (negotiable) schemes for achieving it. International monetary theorists, on the other hand, have been concerned with the theoretical policy problems of achieving and maintaining balance-of-payments equilibrium in the present internaticnal monetary system of fixed exchange rates. They have also become concerned with the problems of the system as a monetary system. This paper belongs to the latter category. It seeks to outline the main propositions of the analysis of international economic policy and policy problems that have been developed by economists working in this field in recent years. Part I is concerned with the economic policy problems of maintaining both full employ¬ment and balance-of-payments equilibrium, first for a single country on a fixed exchange rate, then for two or more countries linked in a multi-country inter¬national monetary system. Part II is concerned with certain features of the present international monetary system, viewed as a monetary system. The analysis of Part I is Keynesian, that of Part II classical, in approach. Both parts draw heavily on papers presented at the University of Chicago Conference on Inter¬national Monetary Problems organized by R. A. Mundell, held at Chicago in September 1966.