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

Author Name Willem THORBECKE (Senior Fellow, RIETI)
Creation Date/NO. December 2022 22-E-115
Research Project East Asian Production Networks, Trade, Exchange Rates, and Global Imbalances
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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.