Two themes run through this collection of essays. The first concerns the role of the international monetary system in the functioning of the global economy. The intricacies of international finance tend to be dismissed by analysts of economic growth, who focus on the accumulation of capital and labor inputs and on technical change in the production function that transforms them into outputs of final goods. In fact, as recent events have underscored, this dichotomy can lead to an incomplete and misleading picture of the aggregate economy. Economic growth is predicated on a stable macroeconomy, which in turn requires a stable financial environment. As new technologies link national financial markets ever more tightly together, the international monetary system through which cross-border transactions are settled comes to play an increasingly central role in the operation of the macroeconomy and its financial sector.

By highlighting the connection between the international monetary system and the macroeconomy, turbulence in financial markets has led to renewed calls for international monetary reform. This raises a host of questions about the optimal design of international monetary institutions. Theory can shed light on the operating characteristics of different institutional arrangements. But it delivers useful results only by stripping away complications that yield ambiguous conclusions in the abstract. For those concerned with the operation of different international monetary arrangements not in theory but in practice, there is no substitute for concrete evidence from historical experience.