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This paper presents a review of the principal issues emerging from an IMF Conference held in March 1983. The special drawing right has been conceived in the 1960s and has been formally provided in the first amendment to the Articles of Agreement of the IMF, which took effect in 1969. Upon the abandonment of the Bretton Woods system of fixed exchange rates and the coming of freedom for the IMF members to adopt the exchange arrangements of their choice, a lack of discipline has been felt in the international monetary system.

Banks and Banking --- Exports and Imports --- Labor --- Macroeconomics --- Public Finance --- Financial Risk Management --- International Lending and Debt Problems --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Current Account Adjustment --- Short-term Capital Movements --- Wages, Compensation, and Labor Costs: General --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Debt --- Debt Management --- Sovereign Debt --- International economics --- Labour --- income economics --- Public finance & taxation --- Banking --- Investment & securities --- Finance --- Debt service --- Current account deficits --- Public sector wages --- Public employment --- External debt --- Balance of payments --- Oil --- Commodities --- Banks and banking --- Economic theory --- Foreign exchange --- United States --- Income economics

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This paper reviews the channels of macroeconomic interdependence under flexible exchange rates. The model emphasizes the linkage of international capital markets, expectations, and nominal and real wage stickiness in affecting the impact of disturbances on employment, prices, and the exchange rate. The standard rational-expectations macroeconomic model is extended to facilitate analysis of the role of risk premiums created by imperfect asset substitutability. Peso problems and bubbles are discussed briefly. The paper discusses two alternative proposals designed to deal with the exchange rate implications of policy interdependence. One is the McKinnon proposal for world monetarism; the other is the band proposal. Both proposals are rejected because they fail to cope with the problems of the transition to a low, common inflation rate. The paper concludes with the suggestion that improved performance of the world economy cannot come from a better exchange rate system but rather from a more systematic use of incomes policies.

Capital movements --- Currency --- Deflation --- Exchange rate adjustments --- Exchange rate arrangements --- Exchange rate flexibility --- Exchange rates --- Exports and Imports --- Foreign Exchange --- Foreign exchange --- Government and the Monetary System --- Income economics --- Inflation --- International economics --- International Investment --- International Lending and Debt Problems --- Labor --- Labour --- Long-term Capital Movements --- Macroeconomics --- Monetary economics --- Monetary Systems --- Money and Monetary Policy --- Money --- Payment Systems --- Price Level --- Prices --- Real exchange rates --- Regimes --- Standards --- Wages --- United States