The threat of 'currency wars': A European perspective

摘要

The ‘currency war’, as it has become known, has three aspects: 1) the inflexible pegs ofudundervalued currencies; 2) recent attempts by floating exchange-rate countries to resistudcurrency appreciation; 3) quantitative easing. Europe should primarily be concernedudabout the first issue, which relates to the renewed debate about the internationaludmonetary system. The attempts of floating exchange-rate countries to resist currencyudappreciation are generally justified while China retains a peg. Quantitative easing cannotudbe deemed a ‘beggar-thy-neighbour’ policy as long as the Fed’s 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 euro’s exchange rate has not been greatly impacted by the recent currency war; the euro continues to be overvalued, but less than before.