Exchange rate policy and trade deficit in the United States of America

Katarzyna Twarowska

Abstract


Exchange rate policy of a large country such as the United States is particularly important, for the domestic economy as well as other countries and the entire world economy. The exchange rate could affect several aspects of economic performance. Possible effects of depreciating currency include increased net exports, decreased international purchasing power, rising commodity prices, and upward pressure on interest rates. The aim of the paper is to analyze and evaluate the exchange rate policy of the United States and its links to the trade balance. The presentations of theories explaining the relationship between exchange rate and trade balance is followed by the analysis of the statistical variables in the specified periods. The conclusion is that nowadays, under a floating dollar and growing capital flows, the trade balance is increasingly determined by issues related to U.S. fiscal and monetary policies and the propensity to save, as well as the policies of the major trading partners of the United States and the possibilities for cooperation on the international level.


Keywords


exchange rate policy, dollar, trade deficit

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DOI: http://dx.doi.org/10.17951/h.2015.49.2.215
Date of publication: 2015-07-28 13:12:35
Date of submission: 2015-07-28 10:49:32


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