Working Paper: NBER ID: w2193
Authors: Barry Eichengreen
Abstract: Specialists in international relations have argued that international regimes operate smoothly and exhibit stability only when dominated by a single, exceptionally powerful national economy. In particular, this "theory of hegemonic stability" has been applied to the international monetary system. The maintenance of the Bretton Woods System for a quarter century through 1971 is ascribed to the singular power of the United States in the postwar world, while the persistence of the classical gold standard is similarly ascribed to Britain's dominance of the 19th-century international economy. In contrast, the instability of the interwar gold-exchange standard is attributed to the absence of a hegemonic power. This paper assesses the applicability of hegemonic stability theory to international monetary relations, approaching the question from both theoretical and empirical vantage points. While that theory is of some help for understanding the relatively smooth operation of the classical gold standard and early Bretton Woods System as well as some of the difficulties of the interwar years, much of the evidence proves to be difficult to reconcile with the hegemonic stability view.
Keywords: Hegemonic Stability; International Monetary System; Bretton Woods; Gold Standard
JEL Codes: F33; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| U.S. hegemony (F52) | stability of the Bretton Woods system (F33) |
| Britain's dominance (F54) | persistence of the classical gold standard (N13) |
| absence of hegemonic power (D74) | instability of the interwar gold-exchange standard (F33) |
| hegemonic power (P16) | stability of monetary systems (E42) |
| negotiation and collaboration (D74) | stability of monetary systems (E42) |