Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108206
Authors: 
Darvas, Zsolt
Pisani-Ferry, Jean
Year of Publication: 
2011
Series/Report no.: 
IEHAS Discussion Papers MT-DP - 2011/2
Abstract: 
The 'currency war', as it has become known, has three aspects: 1) the inflexible pegs of undervalued currencies; 2) recent attempts by floating exchange-rate countries to resist currency appreciation; 3) quantitative easing. Europe should primarily be concerned about the first issue, which relates to the renewed debate about the international monetary system. The attempts of floating exchange-rate countries to resist currency appreciation are generally justified while China retains a peg. Quantitative easing cannot be deemed a 'beggar-thy-neighbour' policy as long as the Fed's policy is geared towards price stability. Current US inflationary expectations are at historically low levels. Central banks should come to an agreement about the definition of price stability at a time of deflationary pressures. The euro's exchange rate has not been greatly impacted by the recent currency war; the euro continues to be overvalued, but less than before.
Subjects: 
currency war
quantitative easing
currency intervention
international monetary system
JEL: 
E52
E58
F31
F33
ISBN: 
978-615-5024-32-0
Document Type: 
Working Paper

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