Managing Exchange Rates: Achievement of Global Re-balancing or Evidence
of Global
Co-Dependency?
The United States and Its Trading Partners Have Serious Vested Interests
In the Status Quo
By Catherine L. Mann
Catherine L. Mann is a senior
fellow with the Institute for
International Economics.
Previously, she served in policymaking
institutions in
Washington, including the
Federal Reserve Board,
President's Council of
Economic Advisers, and the
World Bank. She is also an adjunct professor of management at the Owen School of
Management at Vanderbilt University (on leave) and is
currently teaching at the Johns Hopkins School for
Advanced International Studies. She received her Ph.D.
from the Massachusetts Institute of Technology and her
undergraduate degree from Harvard University.
Long-term global economic health requires that external
imbalances and the internal imbalances that support
them be corrected by both the United States and its
trading partners. The current path of external imbalances appears to be unsustainable, but relying on
exchange rate adjustments is unlikely to suffice as long
as there is a co-dependency of structural characteristics
and policy choices between the United States and its
trading partners. There is a real possibility that the
entanglements created by this co-dependency cannot be
undone by anything short of a global economic crisis.
Based on the presentation at NABE 2004 Policy Conference,
March 25 and 26.
By Catherine L. Mann