Download the Book: The International Monetary System and the Theory of Monetary Systems by Pascal Salin, Edward Elgar, 2016

The present volume is an accomplished theoretical inquiry into the workings of the international monetary system. As the author himself explains in the introduction, the book is intended to provide readers with a good understanding of the economic principles and economic problems of international monetary economics, while drawing on sound general economic theory. Salin fully succeeds in painting a clear and concise picture of the current issues in international monetary relations, and of the theoretical discussions and proposed solutions surrounding them.

Adopting an almost exclusively theoretical point of view, Salin guides his readers in textbook-like fashion through the intricate core propositions of international monetary economics. The first two parts of the book discuss the basic statements and analyses in the field, such as the theory of exchange, the demand for money, the exchange rate, and the fundamental principles of balance of payments analysis. Part III delves into the issue of international monetary equilibrium, touching on the concepts of inflation and devaluation, the formation of international prices, and a range of exchange rate systems including fixed and flexible exchange rates. In Part IV, Salin concludes his investigations with a brief analysis of monetary policy, monetary crises, and monetary integration.

From the beginning, the building blocks of Salin’s arguments are excellently set up, and together they form an almost self-contained and complete system of thinking about monetary problems. But the strength of the book comes primarily from the fact that this system is grounded in general economic theory. While particular discussions are specialized, and thus somewhat narrow, the overall volume adds to the big picture of the workings of monetary macroeconomics, with a solid foundation in microeconomic theory. Each chapter neatly draws a conclusion on which Salin builds further arguments, but which also constitutes a valuable lesson in itself. Eventually, his analyses lead up to a refreshing overarching remark: “a surprising paradox in monetary theory: people debate about the best monetary policy, although the best solution would be not to have any monetary policy. This was the case in a pure gold standard (that is, without central banks)” (p. 245).

In relation to this welcome insight, three of the valuable lessons that Salin’s short volume offers warrant particular attention. In each case, the author sews up a competent critique of the widespread misunderstandings that surround these issues in modern literature.