Introduction

The global monetary system — the structure that governs financial relations between nations and their macroeconomic policies — plays an indispensable role in the smooth functioning of the world economy and even world politics. As Richard Cooper noted during the global monetary turmoil of the 1970s,

[w]hen monetary relations go well, other relations have a better chance of going well; when they go badly, other areas are likely to suffer too. Monetary relations have a pervasive influence on both domestic and international economic developments, and history is strewn with examples of monetary failure leading subsequently to economic and political upheaval.

(Cooper 1975: 63)

The monetary volatility of the 1970s was widely linked to the breakup of the Bretton Woods regime and the shift from fixed-but-adjustable exchange rates toward flexible ones, which had loosened the constraints on national monetary policies. When the advanced market economies (AMEs) removed their capital controls during the 1970 and 1980s, the re-emergence of free capital mobility and global finance further contributed to the idea that the global monetary system had transformed into an increasingly instable “non-system” (Gilpin 1987; Helleiner 1994).