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N° 238 |
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| October 2004 |
| The Dollar in the
G20 |
Agnès Bénassy-Quéré
Amina Lahrèche-Révil
Valérie Mignon |
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| The swelling of the United States' foreign
debt is weakening the international monetary system and feeding expectations of
a long term depreciation of the dollar. The required adjustment of the US current
account thus appears as a burden to be distributed between the US and its trade
partners, via adjustments in the exchange rate. The greater exchange rate flexibility
which the G7 has called for concerns mainly the large emerging economies that
are not included in it. The G20 may therefore appear as a forum better suited
to furthering international monetary cooperation. This article evaluates the adjustments
required, and their distribution within the G20, on the basis of an econometric
description of the behaviour of the real exchange rate over the long term. If
all countries had gone along with flexibility, then the euro would have been close
to its equilibrium rate against the dollar in 2003. But a simulation of Asia’strategy
for pursuing monetary stability vis-à-vis the dollar suggests that the
euro needed to appreciate a further 10-15%. |
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