Love it or hate it... the dollar's here to stay

Eswar Prasad interviewed by Viv Davies, 29 Mar 2014

Eswar Prasad talks to Viv Davies about his recent book, ‘The Dollar Trap: How the US dollar tightened its grip on global finance’, which examines how, paradoxically, in light of the financial crisis, the dollar continues to play a central role in the world economy and why it will remain the cornerstone of global finance for the foreseeable future. They also discuss the current frameworks for international economic cooperation as well as currency wars, unconventional monetary policy and the prospects for the renminbi becoming the world's reserve currency. The interview was recorded in London in March 2014.

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See Also

Prasad, Eswar S (2014) The Dollar Trap: How the U.S. dollar tightened its grip on global finance , Princeton University Press.

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Topics: Exchange rates
Tags: Currency wars, Emerging-market economies, exchange-rate policy, foreign exchange reserves, international currency

Independent monetary policies, synchronised outcomes

Espen Henriksen, Finn Kydland, Roman Šustek, 2 October 2013

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The recession in the Eurozone has given new life to optimal-currency-area thinking. The argument goes that the disadvantages of a single currency come from the loss of flexibility and ability to use monetary policy to respond to “asymmetric shocks” (Krugman and Obstfeld 2009).

Topics: Exchange rates, Monetary policy
Tags: capital controls, Central Banks, EMU, exchange-rate policy, inflation, monetary policy

Is there a dilemma with the Trilemma?

Michael W Klein, Jay C. Shambaugh , 27 September 2013

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In the Handbook of Safeguarding Global Financial Stability, the chapter “Capital Mobility and Exchange Rate Regimes” begins “Forced to state all the insights of international macroeconomics while standing on one leg, one could do worse than raise a foot off the ground and say something like:

Topics: Exchange rates, Monetary policy
Tags: capital controls, exchange-rate policy, global crisis, monetary policy

Fixed versus flexible exchange-rate regimes: Do they matter for real exchange-rate persistence?

Paul Bergin, Reuven Glick, Jyh-lin Wu, 4 October 2012

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Flexible exchange rates have been praised in economic theory as a mechanism for helping relative prices adjust between countries in response to shocks to relative supply and demand (Friedman 1953). In this view, fluctuations in the real exchange rate, measuring the relative cost of living across countries, are a welcome thing.

Topics: Europe's nations and regions, Monetary policy
Tags: exchange-rate policy

The limits of a purely intra-euro rebalancing strategy

Zsolt Darvas, 5 September 2012

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The perceived failure of Greece, Portugal, and Spain to achieve sustainable external positions and economic growth inside the Eurozone is a major factor behind the current crisis. Their trade deficits should be turned to sizeable surpluses in which real exchange rate developments should play a role.

Topics: EU policies, Europe's nations and regions, Monetary policy
Tags: Eurozone crisis, exchange-rate policy, Greece, Portugal, Spain

Small open economies have to be managed differently: devaluation is contractionary in both the short and long run

DeLisle Worrell, 23 June 2012

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There is a fallacy at the root of most of the discussion of the European economic crisis, and it is that countries like Greece would have the option to grow their economies through exchange rate depreciation, were they outside the Eurozone.

Topics: Europe's nations and regions, Global economy, Monetary policy
Tags: Barbados, Eurozone crisis, exchange-rate policy, Greece

Foreign-exchange intervention and the fundamental trilemma of international finance: Notes for currency wars

Michael Bordo, Owen F Humpage, Anna J Schwartz, 18 June 2012

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In the mid-1990s, many of the large developed countries ended their activist approach to foreign-exchange-market intervention. Yet while these operations faded, they never disappeared. The Great Recession recently piqued interest in them, as exchange-rate volatility increased and threats of currency wars were heard (see Neely 2011).

Topics: International finance
Tags: exchange-rate policy, financial trilemma

On Inflation Targeting and Forex Intervention: Are Two Targets Better Than One?

Jonathan D Ostry, Atish R Ghosh, Marcos Chamon, 27 May 2012

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The global financial crisis has reminded emerging market economies, if they needed reminding, that capital flows can be highly volatile and that crises need not be home grown. Emerging markets have been affected in a variety of ways, not least by the sharp ups and downs in exchange rates that volatile capital flows engender.

Topics: Monetary policy
Tags: emerging markets, exchange-rate policy, monetary policy

How should Japan’s current exchange rate be viewed?

Takatoshi Ito, Junko Shimizu, 20 March 2012

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Japan is frequently cited by US and European commentators as a warning of what could happen to their economies (see, for instance, Muellbauer and Murata 2011). We hear less, however, about what is happening now.

Topics: Global crisis, International finance, International trade
Tags: exchange-rate policy, Japan

The renminbi’s prospects as a global reserve currency

Eswar Prasad, Lei (Sandy) Ye, 16 February 2012

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Popular discussions about the prospects of China’s currency – the renminbi – range from the view that it is on the threshold of becoming the dominant global reserve currency to the concern that rapid capital-account opening poses serious risks for China.

Topics: International finance, International trade
Tags: China, exchange-rate policy, globalisation, renminbi

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