A regional currency system is a system in which countries in a particular region negotiate to form a currency area based on certain regional countries' economic union and currency union. A central bank is jointly established to issue and manage a unified currency in the region. The current regional monetary systems mainly include the West African Monetary Union system, the Central African Monetary Union system, the Eastern Caribbean Monetary System, and the European Monetary Union system.
The establishment of a regional currency system is based on the theory of currency integration. "Region" is the most appropriate currency area with a specific meaning. This area is a country (region) where some factors of production, such as commodities, labor, capital, etc., can flow freely, the level of economic development and inflation are relatively close, and the economic policies are somewhat coordinated. It constitutes an independent currency area where full employment, price stability, and international balance of payments can be achieved through coordinated monetary, fiscal, and exchange rate policies. The euro is an excellent practice of the theory of the most moderate currency area. Because European countries are small and many, their economic development levels are similar, and they have the same historical and cultural background. The establishment of the European currency system and the official launch of the euro signified that the modern currency system had new content and entered a new stage of development.
Among the 15 EU countries, except Greece, Sweden, Denmark, and the United Kingdom, the remaining 11 countries (France, Germany, Luxembourg, Belgium, the Netherlands, Italy, Spain, Portugal, Finland, Austria, and Ireland) have become the first batch of euro countries. The European Central Bank is located in Frankfurt, the financial center of Germany, and the first president is the Dutchman Wilhelm Duisenberg. By the exchange rate conversion mechanism of the euro system, at the same time that the euro was officially launched on January 1, 1999, the exchange rate of the euro against the currencies of 11 countries was determined. The exchange rate between the money of the member countries and the euro was up to 2002 (transition period). It was fixed entirely before being replaced by the Euro and cannot be changed. From January 1, 2002, Euro banknotes and coins began to circulate. The European Central Bank uniformly designed euro banknotes. The central banks of various countries were responsible for printing and issuance; the design and distribution of Euro coins were completed by each country separately. On July 1, 2002, the original currencies of various countries ceased to circulate. At the same time, the euro will officially become the unified legal tender of all member states.
The regional monetary systems mainly include the West African Monetary Union system, the Central African Monetary Union system, the Eastern Caribbean Monetary System, and the European Monetary Union system. The regional currency system generally corresponds to the relative consistency of the multinational regional economy and the currency union system.
The West African Monetary Union System The West African Monetary Union System was initially established on May 12, 1962. It was composed of seven member states, including Senegal, Niger, Benin, Côte d’Ivoire, Burkina Faso, Mali, and Mauritania in Western Africa. In November 1963, Togo joined the alliance. The West African Monetary Union member states were initially been French territories or colonies and were part of the franc zone. These countries used the "French African Franc" for some time before and after independence. On November 1, 1962, the West African Monetary Union. The “Central Bank of West African Countries,” established as the standard central bank of the member countries, is headquartered in Dakar, the capital of Senegal, and has agencies in each member country. The head office is responsible for formulating monetary policies, managing foreign exchange reserves, and issuing a common currency. "Financial Community Francs" for use by member states.
The Central African Monetary Union system comprises five member states: Cameroon, Chad, Congo, Gabon, and the Central African Republic. These member states were initially been French colonies and part of the franc zone, just like the West African Monetary Union member states. , The currency used before and after independence was also the French CFA franc. On April 1, 1973, the China-Africa Monetary Union established a joint central bank called the "Bank of Central African States." The head office is located in Yaoundé, the capital of Cameroon. The currency "China-Africa Financial Cooperation Franc." Although the two currency unions of West Africa and Central Africa issue currencies with different names, they both adopt a currency issuance mechanism that pegs to the French franc, and the two currencies are equivalent.
The Eastern Caribbean Monetary Union System, The Eastern Caribbean Monetary Area, also belongs to the regional monetary union system. The currency area comprises Antigua, Dominica, Grenada, Montserrat, Saint Lucia, Saint Vincent, and other countries. In 1965, the Eastern Caribbean Currency Area countries established a joint currency management bureau, abolished the original currency-the "British West Indian Dollar," and began to issue the "Eastern Caribbean Dollar," implementing a linked exchange rate pegged to the British pound. On July 7, 1976, the East Caribbean dollar was decoupled from the British pound and changed to peg to the U.S. dollar. For more than 20 years, the exchange rate has been fixed at 2.70 yuan to 1 U.S. dollar. The currency management bureau uniformly issues the "East Caribbean Dollar," the currency commonly used by all countries in the region, but is not responsible for the supervision of banks in various countries, does not stipulate the payment of deposit reserves, and does not assume the obligation of the "lender of last resort." On October 1, 1983, the Eastern Caribbean Central Bank was established in the Eastern Caribbean Currency Area, which replaced the original Currency Authority.
As the European Monetary Union accelerates economic and financial integration among the member states of the European Union, a new type of regional currency system, the European Monetary System, is emerging. The European Monetary System began with the European Monetary Union. Its origins can be traced back to the "European Payments Union" established by the European Economic Cooperation Organization on July 1, 1950, and the "European Monetary Agreement" that replaced the Union in 1958. Although the "European Payment Union" and the "European Monetary Agreement" initiated the process of the European currency union, they did not propose specific ideas for European currency integration. The starting point was mainly to promote the economic and trade development of the member states. After the establishment of the European Community, the European currency unity was put on the agenda. In 1957, Germany, France, Belgium, the Netherlands, Luxembourg, and Italy signed the Treaty of Rome, and the Charter of the European Economic Community was promulgated. In December 1969, the European Community formally proposed establishing the European Economic and Monetary Union and devised a timetable, but the first ten years did not go smoothly. In March 1979, the 12 member states of the European Community decided to adjust their plans and officially began to implement the European Monetary System (EMS) construction plan. After 1988, this process was significantly accelerated. In December 1991, the 12 member states of the European Community signed the "Political Union Treaty" and the "Economic and Monetary Union Treaty" in Maastricht, the Netherlands.
The "Political Union Treaty" objective is to implement a common foreign policy, defense policy, and social policy. The "Economic and Monetary Union Treaty" stipulates that the Economic and Monetary Union (EMU) shall be established no later than January 1, 1999. By then, a unified currency, central bank, and monetary policy will be realized within the alliance. After the parliaments of the member states ratified the Maastricht Treaty, it came into effect on November 1, 1993. At the same time, the European Community has renamed the European Union. The European Monetary Agency was established in 1994, and in December 1995, it was formally decided that the name of the unified European currency was the Euro (Euro). The European Central Bank was formally established on July 1, 1998, and the Euro was officially launched on January 1, 1999. According to the plan, From 1999 to 2001, the euro initiated a three-year transition period. [NextPage]
Formation and development
The establishment of a regional currency system is based on the theory of currency integration. In the early 1960s, Western economist Mundell proposed the "optimal currency area" theory. He believes that to make the floating exchange rate play a better role, it is necessary to abandon the national currency system of each country and implement a regional currency system. The "region" he refers to is the most appropriate currency area with a specific meaning. This region comprises commodities, labor, capital, and other production factors that can flow freely. The economic development level and inflation rate are relatively close, and the economic policy is fairly coordinated. An independent currency area composed of countries (regions) in the currency area through coordinated monetary, fiscal, and exchange rate policies to achieve full employment, price stability, and balance of international payments.
The development process of the regional monetary system at different stages roughly experienced two:
①In the lower step, each member country still maintains an independent national currency, but the coins between the member countries adopt a fixed exchange rate system and are freely convertible. The lands outside the member countries decide on their own, and part of the international reserves are centrally kept, but each maintains independent international accounts. Revenue and expenditure and fiscal and monetary policy.
②In the higher stage, a single currency is implemented in the region; a central bank is jointly established to issue common currency for member countries and formulate a unified monetary and financial policy, supervise the financial institutions and financial markets of each member country, and carry out measures on the governments of member countries. Financing, handling financial matters mutually agreed and authorized by member states, etc.; member states no longer maintain the independent balance of payments and implement unity of capital market and unity of monetary policy.
The corresponding regional monetary system generally corresponds to the relative consistency of the global, regional economy, and currency union system. After the 1960s, some less developed countries with neighboring regions first established a monetary union and found a central bank jointly organized by participating countries within the block. This kind of international central bank issues common currency and currency for member countries. Formulate a unified monetary and financial policy. At the end of the 1970s, Europe began the process of currency integration. The countries that implement regional currency systems are mainly in Africa, the Eastern Caribbean, and Europe. The West African Monetary Union system, the Central African Monetary Union system, the Eastern Caribbean currency system, and the European Monetary Union system are all regional currency systems.
And the international monetary system.
There are differences and connections between national currency systems, international currency systems, and regional currency systems.
Scope of application The currency system of different countries refers to the system formed by a country's government in the form of laws and regulations to regulate the relevant elements of the national currency, the organization, code of currency circulation, etc. The national currency system manifests a country's currency sovereignty, which is independently formulated and implemented by the country's government or judicial institutions. Its adequate scope is generally limited to the country.
The international monetary system, also known as the global financial system, is the rules governing the currency relations of various countries and a set of arrangements and practices on which various international transactions and payments are based. Participating governments usually negotiate the global monetary system. Once agreed, all participating countries should consciously abide by it.
A regional currency system refers to a system in which relevant countries (regions) in a particular region form a currency area through coordination. A central bank is jointly established to issue and manage a unified currency in the region. Its scope of application is limited to a particular area.