Money, Banks and Finance in Economic Thought

The Latin American origins of Triffin’s plans for European monetary integration

Maes Ivo, National Bank of Belgium
Pasotti Ilaria, independent researcher

Robert Triffin was one of the architects of the European Payments Union and was very influential in the process of European monetary union, especially as the monetary advisor of Jean Monnet. From 1942 to 1946, Triffin worked for the Board of Governors of the Federal Reserve System in Washington, focusing on Latin America. In this paper we will analyze how his experience at the Federal Reserve System has been shaping his later ideas on European monetary union. During this time, Triffin became more and more absorbed by a “progressive Keynesian” spirit. For Triffin, the economic cycle in Latin American economies was not so much determined by domestic savings and investment, like in the older industrial countries, as by the inflow or outflow of foreign exchange. Moreover, these external shocks were amplified by the functioning of the gold (exchange) standard. In his proposals for monetary reform, Triffin sought to design a central banking framework in which erratic shocks could be offset instead of amplified. He was further critical of exchange rate adjustments, but more open to capital controls. At the end of his Fed period, Triffin became also more interested in the international monetary system, focusing very much on the reconciliation of domestic monetary policies with the prerequisites of international balance.

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Keywords: Triffin, Federal Reserve, monetary reform, Latin America

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