Real Exchange Adjustment

Michael J. Howell
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Michael J. Howell: CrossBorder Capital Ltd.

Chapter Chapter 5 in Capital Wars, 2020, pp 59-74 from Springer

Abstract: Abstract The exchange rate is a main transmission channel for liquidity. Liquidity and productivity shocks can both affect the real exchange rate. This leads to some combination of nominal exchange rate change and relative price change. Because more and more economies are international price-takers, the bulk of the relative price adjustment is channelled through asset prices, particularly when nominal exchange rates are fixed or targeted by policy-makers, such as in the Eurozone and between the US and China. Asset price booms often characterise the Emerging Market economies, which often currency target the US dollar. Equally, the desire to maintain the collateral values of domestic assets force many financially dominant economies, such and Britain and the US, to devalue their currencies rather than allow their asset prices to fall.

Keywords: Global Liquidity; Real exchange rate; US dollar; China; Supply chains (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-39288-8_5

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DOI: 10.1007/978-3-030-39288-8_5

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