Finally, with international cooperation in monetary and financial matters becoming more and more an economic necessity, it is important that the exercise of contemporary monetary sovereignty as cooperative sovereignty satisfies high standards of transparency and accountability. This seems particularly crucial in so far as such international cooperation involves conferrals of sovereign powers to international organizations or to the organs of a monetary union, due both to the increasing complexity that results from the related increase in the number of players involved and to the fact that such conferrals move the locus of decision-making further away from national peoples as the true holders of sovereignty.
Indeed, as convincingly analysed by Raustiala, 71 if the legitimacy of an economic institution or body is at least to some degree grounded in the effectiveness with which it works successfully towards the promotion of sovereign values, a given institution may gain at least some legitimacy, ceteris paribus , from the simple fact that it is instrumentally useful, although it lacks traditional mechanisms of accountability.
Approaching the end of this article, and for the purpose of illustration, sub-section C below will now consider whether the increasing regionalization of monetary sovereignty would have to be regarded as surrender or as effective exercise of monetary sovereignty.
Governing a More Global World
The states participating in a fully-fledged monetary union, like notably the Economic and Monetary Union EMU of the European Union EU , have transferred large parts of their sovereign powers in the realm of money to the supranational level. Most notably, for the duration of their membership the members of a monetary union renounce their respective rights to create money and to conduct a national monetary policy, thereby renouncing a powerful instrument, at least in a short-term perspective, for demand management.
To the extent that the members of a monetary union can no longer control the exercise of these powers by the union, these conferrals of powers are rightly analysed as transfers and not as delegations of powers, and this independently of whether the participating states retain a formal right to withdraw from the monetary union. The question whether, absent an express treaty rule authorizing a unilateral withdrawal, a member state of a supranational organization may nevertheless assert its sovereignty by withdrawing from the organization, hence revoking in toto all conferrals of powers to that organization, is a highly contested one.
Without embarking on this issue in detail, three brief comments appear warranted. Secondly, to the extent that it is willing and able to assume the economic consequences of leaving the monetary union, any member state may always decide to breach the rules of the monetary union and leave.
In addition, every member retains an irreducible right , based on its capacity as a sovereign state, to withdraw unilaterally from the union. Through such unilateral withdrawal, the state concerned lawfully revokes all conferrals of sovereign powers, independently of what the relevant treaty may say. Overall, the fact that participation in a monetary union is regarded by some as surrender of monetary sovereignty and by others as its effective exercise under contemporary economic constraints seems to a large extent to be due to the dual nature of the concept of sovereignty.
As explained in this article, the concept of sovereignty can be validly approached in two ways: by focussing directly on the supreme and irreducible authority of independent states and indirectly by looking at the various sovereign powers that originally all derive from the same source, namely the capacity of independent statehood. On the one hand, this explains why one can speak of regionalization of monetary sovereignty whenever independent states decide to pool certain sovereign powers in the realm of money by transferring them to a supranational body.
On the other hand, however, to the extent that the member states of a monetary union can potentially recover their sovereign powers, 77 all they essentially do is to transfer to the supranational level, until further notice, certain state competences in the realm of money, but not their monetary sovereignty itself.
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Vast transfers of state competences in the realm of money to a monetary union imply, by definition, that the state concerned renounces, at least temporarily, the independent exercise of those competences. As noted earlier, by entering into a monetary union, the participating states may jointly regain a margin of manoeuvre with respect to sovereign powers in the realm of money the individual, national, exercise of which had previously become more and more ineffective under the impact of economic globalization and financial integration.
The above arguments apply to a large extent also to the phenomenon of dollarization, i. Such use of the foreign currency would be in parallel to or instead of the actual domestic currency. Clearly, if a country decides to dollarize its economy officially it does so with the objective of greater fiscal discipline and thus greater macroeconomic stability, the objective of lower inflation rates and thus lower real exchange rate volatility, and the objective of a deepened financial system. All these objectives ultimately serve to foster monetary and financial stability, i.
Having reached the end of the analysis provided in this article it appears appropriate to conclude briefly as follows. Under the contemporary definition of monetary sovereignty as elaborated in this article, and based on the inherently dual nature of sovereignty as a dynamic concept with not only positive but also constantly evolving normative components, the concept of monetary sovereignty cannot, by its very nature, become eroded under the increasingly strong impact of various economic and legal constraints.
However, there is no denying that such contemporary constraints play a major role in defining which steps need to be taken in order to promote global monetary and financial stability and the other core values incorporated in, and expressed by, contemporary monetary sovereignty. As analysed in this article, the concept of monetary sovereignty is able to adapt to a constantly changing economic environment, and thereby in turn helps to define what constitutes a responsible exercise of the sovereign powers in the realm of money as understood in a wider sense.
There is indeed little doubt that most, if not all, daily questions relating to specific rights and obligations of states, international organizations, and private persons can be asked and resolved effectively without having recourse to the concept of monetary sovereignty. The findings of this article do not deny that reflections on the underlying nature of the concept of monetary sovereignty serve above all as a stimulating framework of enquiry and also as a convenient vehicle for debates on specific rights and obligations relating to the contemporary exercise of the formally exclusively national sovereign powers in the realm of money.
Yet it would be a mistake to believe that the above observations turn the concept of monetary sovereignty and its evolution as analysed herein into a subject that lawyers have no need ever to deal with. Oxford University Press is a department of the University of Oxford. It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide. Sign In or Create an Account. Sign In. Advanced Search. Article Navigation. Close mobile search navigation Article Navigation.
Volume Article Contents. The present article succinctly presents central aspects of my doctoral dissertation in law as well as of my monograph A Contemporary Concept of Monetary Sovereignty , forthcoming with Oxford University Press in the autumn of Email: clausdz gmail. Oxford Academic. Google Scholar. Cite Citation. Permissions Icon Permissions. Abstract Few legal concepts have been subject to as little critical scrutiny over the past few decades as that of monetary sovereignty. Mill, Principles of Political Economy , ii, at Shan, P.
Simons, and D. Chayes and A. Kalmo and Q. See, e. In this vast, interdisciplinary, body of literature see, e. Weingast and D. Carreau and P. Zedillo ed. Leben, E. Loquin, and M. Steil and M. Hinds, Money, Markets, and Sovereignty An authoritative, commonly accepted, list of the sovereign powers falling within the conceptual scope of monetary sovereignty does not exist at present.
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To the author of the present article it appears appropriate to define the contemporary regulatory scope of monetary sovereignty in a broad manner as comprising the formal state competences to create money via the issue of currency and via the regulation of credit, to conduct monetary and exchange rate policies, to determine the appropriate amount of current and capital account convertibility, and to organize financial regulation and supervision.
Giovanoli ed. Providing an exhaustive overview of the historical and doctrinal origins of the concept of monetary sovereignty would go well beyond the scope of this article. For more detail, also on the relationship of monetary sovereignty to broader concepts of sovereignty, see, e. Nussbaum, Money in the Law — National and International , at See Carreau, supra note 7, at 38 and Nussbaum, supra note 17, at See F. As noted in the introduction to this article see supra note 10 , a commonly accepted definition, broad or narrow, of which regulatory powers in the realm of money are truly sovereign powers does not exist.
For a succinct presentation of relevant constraints arising from customary international law see Proctor, supra note 7, at — IMF Art. IV 1 contains a code of conduct for IMF members. Most notably, IMF Art.
IV 1 iii obliges IMF members to avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other members. In particular, according to Art. VIII 2 a , no IMF member shall impose restrictions on the making of payments and transfers for current international transactions without approval of the Fund.
For details see, e. Carreau rightly makes this observation with respect to the liberalization of the capital and current accounts: see Carreau, supra note 9, at For related comments, see, e. For the purpose of conducting monetary policy, the money supply is usually broken down into more or less narrowly defined monetary aggregates, the main ones of which are M0, M1, M2, and M3 with M0 notes and coins being the narrowest aggregate and M3 extending to various types of deposits like savings and demand deposits being the largest. In the eurozone, e. Eurocurrencies are deposits of a specific currency outside the territory of the issuing state.
Germany , Judgment of 17 Aug. Walter B. Besson, supra note 3, at 7— Besson, supra note 3, at 5 quoting, in relevant part, Aalberts, supra note 3, at It should be noted that the characteristics of essentially contestable concepts have been expressed in various ways in the literature. Toon meer Toon minder. Lees de eerste pagina's.
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