MANIFESTATIONS AND EFFECTS OF COMPETITIVE DEVALUATION IN CONDITIONS OF CRISIS
Keywords:competitive devaluation, currency war, international monetary system, price competitiveness
Depletion of the positive effects of fiscal policy and monetary policy in the area of referent interest rate reduction, exchange rate policy has become an instrument through which a country could find a chance to faster come out of the current economic crisis. Competitive devaluation of domestic currency increases the price competitiveness of domestic products and consequently increases the demand for domestic products in the foreign markets. However, if one country takes an action of competitive devaluation, other countries, threatened by such action, are expected to take the countermeasures, which can ultimately lead to a currency war. In this paper we examine the monetary policy of the United States, China and the European ?conomic and Monetary Union. Our goal is to identify the existence, manifestations and effects of competitive devaluations on the international monetary system. The results indicate that the U.S. uses economic unfounded arguments to put pressures on China to revalue its currency, as well as the measures aimed at depreciating dollar. Also, analysis showed that the slow reaction of the Eurozone countries in the settlement of the Greek and Irish debt crisis significantly contributed to the weakening of euro, which has a positive effect on exports from the Eurozone, especially from Germany. Because of the negative consequences that competitive devaluations could have on the stability of international monetary system, the G20 called for restraint from competitive devaluations and the coordination of macroeconomic policies, which could present an opportunity for the international monetary system reform.
Bergsten, F.: Correcting the Chinese exchange rate: an action plan, The US‐Sino Currency Dispute: New Insights from Economics, Politics and Law, Centre for Economic Policy Research, Aприл 2010.
Cline R. W.: Renminbi Undervaluation, China’s Surplus, and the US Trade Deficit, Peterson Institute for International Economics, Number PB10‐20, Август 2010.
Feldstein, M.: Quantitative Easing and the Renminbi, Project Syndicate, http://www.project‐syndicate.org/commentary/feldstein30/English
Francois, Ј.: Deconstructing Sino‐US codependence: revaluation, tariffs, exports and jobs, The US‐Sino Currency Dispute: New Insights from Economics, Politics and Law, Centre for Economic Policy Research, Април 2010.
World Economic Outlook (WEO), Међународни монетарни фонд, октобар 2010.
Wyplosz, C.: Is an undervalued renmimbi the source of global imbalances?, The US‐Sino Currency Dispute: New Insights from Economics, Politics and Law, Centre for Economic Policy Research, Aприл 2010.
Кругман, П., Обстфелд, М.: Међународна економија, Датастатус, Београд, 2009. година.