2 research outputs found
The threat of "currency wars": A European perspective
The âcurrency warâ, as it has become known, has three aspects: 1) the inflexible pegs of
undervalued currencies; 2) recent attempts by floating exchange-rate countries to resist
currency appreciation; 3) quantitative easing. Europe should primarily be concerned
about the first issue, which relates to the renewed debate about the international
monetary system. The attempts of floating exchange-rate countries to resist currency
appreciation are generally justified while China retains a peg. Quantitative easing cannot
be deemed a âbeggar-thy-neighbourâ policy as long as the Fedâs policy is geared towards price stability. Current US inflationary expectations are at historically low levels. Central banks should come to an agreement about the definition of price stability at a time of deflationary pressures. The euroâs exchange rate has not been greatly impacted by the recent currency war; the euro continues to be overvalued, but less than before
A comprehensive approach to the euro-area debt crisis
The euro areaâs sovereign debt crisis continues though significant steps have been taken to
resolve it. This paper proposes a comprehensive solution to the crisis based on three pillars: a
plan to restore banking sector soundness in the whole euro area, a resolution of sovereign debt
crisis -including a revision of EU assistance facilities and a reduction of the Greek public
debt- and a strategy to foster growth and competitiveness. The paper provides novel estimates
and analysis focusing on the current situation of Greece, Ireland, Portugal and Spain