The Irish Economy

Doug Irwin on exchange rates and trade policy

This post was written by Kevin O’Rourke

Doug Irwin provides a nice account of the historical links between exchange rate and trade policy here.

This entry was posted on Wednesday, June 15th, 2011 at 11:16 pm and is filed under Monetary policy, Trade, World Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Kevin Donoghue Says:
June 16th, 2011 at 1:38 pm
It’s an interesting article. I thought this, on the final page, was a bit muddled:

… the WTO has an enforcement mechanism—trade retaliation—that comes out of its dispute settlement system. This has led countries to probe the texts of various WTO agreements in search of support for action against others on the basis of exchange rate disputes. Yet the provisions of these agreements offer little hope to countries seeking to take action against the exchange rate policies of others. Although Article XV of the GATT states that countries “shall not, by exchange action, frustrate the intent of the provisions” of the agreement, that is likely a reference to exchange controls, not exchange rate policy.

Exchange controls are a tool of exchange rate policy, so Irwin seems to be drawing a distinction without a difference here. For example, China can only hold the renmimbi down because there are tight restrictions on FX deals.
Joseph Ryan Says:
June 16th, 2011 at 10:11 pm
An interesting historical percspective.

Why would France have accumulated gold through a trade surplus in the late 1920s/early 1930s. That surprises me. France was devastated as a result of a loss of almost 1 million dead in WW1. Yet running a large trade surplus by late 1920? Was it reparations gold from Germany?
hoganmahew Says:
June 16th, 2011 at 11:26 pm
Occupation of the Ruhr helped too…