Monetary instability, which results from discretionary government policies, is the enemy of an economy's transition from statism to market liberalism. That's the conclusion of a prestigious group of economists and policy analysts in a new book published by the Fraser Institute of Vancouver, Canada, Money and Markets in the Americas: New Challenges for Hemispheric Integration, edited by James A. Dorn, Cato's vice president for academic affairs, and Roberto Salinas-Leon, director of Mexico's Center for Free Enterprise Research (CISLE).
The book is based on papers presented at Cato's 1994 monetary conference in Mexico City, which was cosponsored by CISLE and the Fraser Institute. The papers were updated in light of the Mexican peso crisis in 1995, and several new papers were commissioned for the volume.
"It is the uncertainty about the actions of monetary authorities, and hence the future value of money, that endangers the transition from a closed to an open economy," Dorn writes in his introduction to the book. "Without confidence in the value of money, the soundness of financial institutions, and the exchange rate," he adds, "there can be little confidence in markets and prices. The temptation then is to revert to government regulation and move away from market liberalism."
The book explores such issues as whether a monetary union in the Western Hemisphere would encourage or impede sound monetary policies, whether Mexico should adopt an Argentine-style currency board, and what type of monetary constitution is most appropriate for the nations of the Americas.
Contributors include Federal Reserve Board governor Lawrence B. Lindsey; Jerry L. Jordan, president of the Federal Reserve Bank of Cleveland; Michael Wilson, former international trade minister of Canada; John W. Crow, former governor of the Bank of Canada; Alan Walters, vice chairman of AIG Trading; Steve H. Hanke and Kurt Schuler of Johns Hopkins University; George A. Selgin of the University of Georgia; Juan Andròs Fontaine of the Catholic University of Chile; Jean-Luc Migue of the University of Quebec, and Edward L. Hudgins, Cato's director of regulatory affairs; and Michael Walker, executive director of the Fraser Institute.