Sunday, May 17, 2009

Will exchange rate competition undermine international cooperation?

An interesting piece by Sebastian Mallaby in which he argues that competitive devaluations could undermine economic recovery. I don't see this as a particularly worrisome problem right now. Currency tensions between the US and China are hardly new. And Germany, as part of the eurozone, has already surrendered its monetary policy to the ECB. 

But I do wonder what this means about the viability of export-led growth going forward. If in five years the global economy has recovered, but countries like China are still running massive trade surpluses, does that mean we will have failed to address the systemic problems which caused this recession in the first place?

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