Caps to limit external credit or debt positions, with penalties on positions exceeding the tolerated threshold, were envisioned in Keynes’s Clearing Union proposal almost 70 years ago, and were effectively utilized in the successful experience of the European Payments Union during the 1950s. That proposal was aimed at enhancing the symmetry between creditors and debtors, by distributing the burden of adjustment equally. At least in theory, coordination based on targets rather on instruments can be viewed as more desirable.
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