U.S. Trade Imbalances, East Asian Exchange Rates, and a New Plaza Accord

Willem Thorbecke

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: The U.S. real effective exchange rate is at its highest level since 1985. In that year, the U.S. and its trading partners coordinated a depreciation of the dollar and the U.S. agreed to reduce its budget deficit. This paper reports that a dollar depreciation today would still improve U.S. trade imbalances with East Asia and the world. East Asian countries would also benefit from a dollar depreciation because it would lower the local currency costs of imported oil, commodities, and food and reduce imported inflation. The U.S. and East Asia should consider engineering a coordinated dollar depreciation and the U.S. should again reduce its budget deficit.

Pages: 37 pages
Date: 2022-12
New Economics Papers: this item is included in nep-int, nep-mon and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:22115

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