We are going to talk about some trade-offs involving the adoption of different monetary
policies—namely a floating exchange range, a pegged exchange rate or a merged
currency—focusing on the impacts of printing local currency versus using a merged
one.
In this video, Dr. Barry Eichengreen explains some of the problems associated with floating
exchange rates, and what some countries do to try to avoid those problems. Particularly, he
uses three historical examples of pegged or merged currency: the Golden Standard of the late
19th Century, the European Monetary System of the 1980s and 1990s, and the Euro. What are
some of the benefits of using a pegged or merged currency, when compared to a floating
exchange rate, and what are some of the problems identified by Professor Eichengreen? What
are some of the ways through which a country can alleviate the impacts of having a merged or
hard pegged currency? Specifically, what are some of the characteristics of the Euro Zone that
make it hard for countries to alleviate the impacts of an economic crisis? Finally, consider some
communities in the United States that use their own local currency instead of the U.S. Dollar,
like the Ithaca Hours ( Ithaca Hours.) (Ithaca, New York), the BerkShares BerkShares)
(Berkshires region, Massachusetts), and the Bay Buck ( Bay Buck) (Traverse City, Michigan).
Given your knowledge of exchange rates and the benefits and problems of printing your own
currency, do you think that those local policies make such communities economically stronger?
Justify your answer.
● Your post should be at least 7 sentences long
● You are expected to make your own post and comment on at least one other
student’s post.
In your communication with other students, please:
● Expand on or clarify an important point.
● Offer an additional argument to support a position taken in an answer.
● Suggest ways in which an idea could be more clearly expressed.
● Identify passages where you think the writer misunderstood a concept or
applied it incorrectly.
● Disagree with a point or position made in an answer.
If you disagree with the views of another student, please:
● State precisely the point you disagree with.
● Offer reasons why you think their view is incorrect and support your position
by citing the text or other sources.
Sample Solution