Dollar appreciation,deficit stimulation,and the new protectionism |
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Authors: | Joseph Aschheim Martin J. Bailey George S. Tavlas |
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Affiliation: | The George Washington University, USA;University of Maryland, USA;U.S. Department of State, USA;U.S. Department of State, USA |
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Abstract: | This article probes whether contemporary U.S. protectionism arises from an appreciating dollar. It concludes that (a) an enrich-thy-neighbor policy of upvaluation has transformed the current U.S. economic recovery into an engine of global recovery; (b) flexible exchange rates continually equilibrate the balance of payments as evidenced in changed domestic—relative to foreign—prices, as well as in capital movements induced by interest-rate differentials resulting from exchange-rate shifts; and (c) flexible exchange rates automatically alter so as to maintain a country's competitive position in the world economy even when facing deficits at home and abroad. |
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Keywords: | Address correspondence to Joseph Aschheim Department of Economics George Washington University Washington D.C. 20052 USA. |
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