U.S. Trade Imbalances, East Asian Exchange Rates, and a New Plaza Accord

The U.S. real effective exchange rate is at its highest level since 1985. In that year, the U.S. and its trading partners coordinated a depreciation of the dollar and the U.S. agreed to reduce its budget deficit. This paper reports that a dollar depreciation today would still improve U.S. trade imbalances with East Asia and the world. East Asian countries would also benefit from a dollar depreciation because it would lower the local currency costs of imported oil, commodities, and food and reduce imported inflation. The U.S. and East Asia should consider engineering a coordinated dollar depreciation and the U.S. should again reduce its budget deficit.

Published: Thorbecke, Willem, 2023. "U.S. trade imbalances, East Asian exchange rates, and a new Plaza Accord," Asia and the Global Economy, Volume 3, Issue 1 (2023), 100054.
https://www.sciencedirect.com/science/article/pii/S2667111523000014