The spread of currency convertibility is one of the most dramatic economic trends of the late twentieth century. It reflects the desire of policy-makers to integrate their economies into the global trading system and to attract financial capital and direct investment from abroad. The question is what implications it will have for economic growth and financial development. Can developing countries rely on capital inflows to finance their domestic capital requirements, or will international financial markets prove fickle, as they have in earlier periods? Will countries be able to peg their currencies to that of a major trading partner, as Estonia and Argentina are attempting to do, or will they suffer unmanageable speculative pressures, like those experienced by some members of the European Monetary System in 1992-93 and Mexico in 1994?
While the countries and circumstances differ, the questions themselves are not new. In a sense, the situation represents a return to an earlier era, when countries were on commodity standards, legal tender was convertible into precious metal on demand, and individuals were free to import and export specie. The parallel encourages us to seek guidance in the history of the international monetary system.
The contributors to this book attempt to present a rounded portrait of this historical experience and to draw out its implications for international monetary and financial developments in Europe and in other parts of the world. As in most discussions of the history of convertible currencies, the gold standard is central to their analyses, but the papers collected here portray the gold standard as a more complex and historically specific set of institutions than is typical of the literature. The gold standard, they show, was a short-lived international monetary arrangement that evolved out of the bimetallic and silver standards of the earlier nineteenth century. The price and exchange-rate stability that were its most praiseworthy features did not span the globe; they were largely limited to Western Europe and North America. Only for a short period did the gold standard actually embrace the better part of the world. The decision to join the system's operation was conditioned by political as well as economic factors. And often the timing