Posts Tagged ‘exchange rates’

No Way to Escape for the Swiss National Bank

September 15, 2011

by Andreas Hoffmann and Gunther Schnabl

It came as a surprise to many: the Swiss National Bank announced an exchange rate target. Accordingly, the Swiss franc will be held above the level of 1.20 francs per euro. Switzerland gives up a part of its sovereignty, when the ECB makes bad press in buying trash-rated euro area government bonds to support unsustainable national budgets.

But, particularly in an environment of global excess liquidity originating in too-easy monetary policies in major advanced economies, small open economies have incentives to stabilize exchange rates. Read the rest of this entry »

The US is “Taking on China”

May 2, 2010

by Andreas Hoffmann and Gunther Schnabl*

In a recent New York Times column Paul Krugman is “Taking on China” again. He argues that the Chinese dollar peg contributes to global imbalances, depressing US and world growth perspectives. Bashing China’s fixed exchange rate is also fashionable in academics. Bernanke blames China’s dollar peg for contributing to a “savings glut” that contributed to the US pre-crisis excesses. Dooley argues that China and other East Asian economies engage in mercantilist trade strategies. Bergsten wants to label China a “currency manipulator.”

We find these arguments unbalanced. Read the rest of this entry »

A Keynesian in China

January 3, 2010

by Mario Rizzo

Paul Krugman is complaining about China’s exchange rate policy. Its government is maintaining an artificially cheap renmimbi (yuan) against the US dollar. This has stimulated the purchase of Chinese exports by US companies and individuals. It has expanded the Chinese trade surplus with the US.

The relatively rich (compared to their Chinese counterparts) American workers are suffering from depressed industries that might be stimulated if Chinese policy were to change. Specifically, if the Chinese were to allow their exchange rates to float, the US dollars would be worth less and the US would export more to China. This would stimulate the employment of resources here.

But wait a minute. Read the rest of this entry »

Follow

Get every new post delivered to your Inbox.

Join 1,737 other followers