Samedi 16
4c. Money

› 9:40 - 10:20 (40min)
› AT4
Triffin Dilemma and Regional Monetary Approach: an Appraisal
Pierre-Hernan Rojas  1@  
1 : Université Paris-Dauphine, PSL Research University  (LEDa-SDFI)  -  Site web
Jérôme de Boyer des Roches
place du Maréchal de Lattre de Tassigny, 75116 Paris -  France

In the second half of the 20th century, Robert Triffin was the first to formalize that, under the gold exchange standard, the key currency issuing country faced a dilemma. Either the United States would stop providing more dollar balances for international finance. In that case, trade would stagnate and there would be a deflationary bias in the global economy. Either the United States would continue to provide more of the international reserve currency, leading ultimately to a loss of confidence in the dollar, as US obligations to redeem foreign holdings with gold would be seen to be unsustainable. Foreshadowing the demise of the Bretton Woods system in 1971, Triffin began to get involved in the regional monetary integration to enable European countries to cope with instability generated by floating exchange rates. Nevertheless, it could be wrong to consider that Triffin saw regional monetary integration as an alternative to the reform of the international monetary system and a way to escape the dilemma. On the contrary, from the outset in the 1940s, Triffin considered regional monetary cooperation and integration as complementary to a reform of the international monetary system.

The reconstruction of Triffin's thinking provides another understanding of the formulation of the dilemma. In the 1940s, first at the Board of Governors of the Federal Reserve System in Washington and then at the International Monetary Fund, Triffin began to study international monetary economics. Triffin's analysis attempted to support the autonomy of national economic policies thanks to an adequate provision of international liquidity, supposed to provide optimum rates of expansion in world trade and production. In the first section of the article, we analyze Triffin's view on the necessity to provide liquidity in a managed international monetary system. According to him, the orthodox gold standard theory did not provide a consistent explanation of the external adjustment mechanism. Indeed, the core countries, like Great Britain, dominated international economic and financial relations while peripheral countries suffered from global cycles. According to Triffin, peripheral countries would have to pursue counter cyclical economic policies to isolate their economy from cyclical disturbances thanks to international liquidity and the core countries would have the responsibility to smooth global cycles. In the second section of the paper, we show that this provision of liquidity was not ensured by the Bretton Woods agreements after the World War 2. Indeed, three quarters of the world monetary gold stock was in the US and the main source of liquidity was the dollars balances that were scarce at that time. To avoid one side of the dilemma – the deflationary bias – Triffin advocated the establishment of a clearing structure for the European countries in 1946-1947 that will give rise to the European Payments Union in 1950. Based on this previous observation, the third section of the paper reappraises the origin of the dilemma formulation by Triffin in his willingness to make the international monetary system more symmetrical in its operation, based on cooperation at the regional level.

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