Table of Contents
Preface ix
Acknowledgments xiii
1 Introduction 1
The Concept of Currency Conflict 2
Historical Background 3
Recent Developments: Renewal of Currency Conflict 7
Plan of the Book 14
2 Key Conceptual Issues 17
The Trade Balance and the Current Account Balance 18
Economic Policies and the Current Account Balance 33
3 Norms for Current Account Balances 47
Current Account Imbalances: The Good and the Bad 48
Currency Policies: Legitimate and Illegitimate 63
4 The "Decade of Manipulation" (2003-13) 69
Currency Aggressors of the Early 21st Century 70
What Constitutes Manipulation? 76
Impacts of Manipulation 86
Recent Developments and Outlook 116
Appendix 4A Public Saving of Nonrenewable Resource Revenues 123
5 Policy Options 129
Macroeconomic/Monetary versus Trade Policy 129
Multilateral versus Unilateral Action 130
Markets to the Rescue? 131
Specific Alternatives 133
Private Diplomacy 133
Mobilization of the International Monetary Fund 138
Reform of the International Monetary Fund 140
Mobilization of the World Trade Organization 143
Inclusion of Currency Issues in Future Trade Agreements 145
Changes in Fiscal Policy 154
Changes in Monetary Policy 155
Use of Countervailing Currency Intervention 156
Imposition of Capital Controls 162
Imposition of Unilateral Import Controls 163
Conclusion 167
6 Conclusions and Recommendations 169
The Currency Problem 169
Self-Insurance versus Manipulation 177
Offensive versus Defensive Intervention 178
The Special Case of Key Currency Countries 179
Rules versus (Lack of) Enforcement 182
Currency Policy and Trade Policy 186
A Proposed Strategy for the United States 186
Multilateralizing the Strategy 192
Currency Conflict and Foreign Policy 196
Conclusion 199
Appendix A Data Sources and Annual Data on Currency Manipulation 201
References 221
Index 229
Tables
2.1 What moves the current account balance? 27
3.1 The costs of financial crises 52
4.1 Official assets and net official flows of currency manipulators, 2003-13 72
4.2 Net official Rows of currency manipulators, 2000-15 73
4.3 Excess currency manipulation, 2000-15 74
4.4 Alternative official asset metric for mature market economies, 2014 83
4.5 Currency manipulators, 2015-16 119
4.6 Recent and projected current account imbalances in selected economies 121
4A.1 Fraction of resource production to save (s) with shared benefits strategy 125