NEW
YORK – In a world of weak domestic demand in many advanced economies
and emerging markets, policymakers have been tempted to boost economic
growth and employment by going for export led-growth. This requires a
weak currency and conventional and unconventional monetary policies to
bring about the required depreciation.
Since the beginning
of the year, more than 20 central banks around the world have eased
monetary policy, following the lead of the European Central Bank and the
Bank of Japan. In the eurozone, countries on the periphery needed
currency weakness to reduce their external deficits and jump-start
growth. But the euro weakness triggered by quantitative easing has
further boosted Germany’s current-account surplus, which was already a
whopping 8% of GDP last year. With external surpluses also rising in
other countries of the eurozone core, the monetary union’s overall
imbalance is large and growing.
In Japan,
quantitative easing was the first “arrow” of “Abenomics,” Prime Minister
Shinzo Abe’s reform program. Its launch has sharply weakened the yen
and is now leading to rising trade surpluses.
The upward pressure
on the US dollar from the embrace of quantitative easing by the ECB and
the BOJ has been sharp. The dollar has also strengthened against the
currencies of advanced-country commodity exporters, like Australia and
Canada, and those of many emerging markets. For these countries, falling
oil and commodity prices have triggered currency depreciations that are
helping to shield growth and jobs from the effects of lower exports.
The dollar has also
risen relative to currencies of emerging markets with economic and
financial fragilities: twin fiscal and current-account deficits, rising
inflation and slowing growth, large stocks of domestic and foreign debt,
and political instability. Even China briefly allowed its currency to
weaken against the dollar last year, and slowing output growth may tempt
the government to let the renminbi weaken even more. Meanwhile, the
trade surplus is rising again, in part because China is dumping its
excess supply of goods – such as steel – in global markets.
Read more at http://www.project-syndicate.org/commentary/dollar-joins-currency-wars-by-nouriel-roubini-2015-05#7d4tCY6xxRhOiDHm.99
Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics
No comments:
Post a Comment