Growing global imbalances threaten to induce a collapse of the dollar, which could in turn produce
a severe recession in the rest of the world. This crisis could force countries to say "never again"
and search for a system to prevent similar disasters. The system that could do so is a reference rate
system—where countries' authorities are forbidden from intervening in order to push the exchange
rate too far from what is termed the "reference rate." It could help a country's authorities manage its
exchange rate to avoid large misalignments, assist the private sector in forming more dependable
expectations of future exchange rates and thus to manage their businesses more efficiently in a world
of floating exchange rates, and aid the International Monetary Fund in designing and managing an
effective system of multilateral surveillance. The world economy would function better as a result, with
less chance of the global imbalances leading to a world recession.
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2. The Reference Rate Proposal
3. Advantages and Disadvantages of a Reference Rate System
4. Three Alternative Variants of the Reference Rate Proposal
5. Selecting and Agreeing on a Set of Reference Rates [pdf]
7. Hypothetical History
8. Conclusion [pdf]