Exchange Rates and Global Rebalancing

48 Pages Posted: 19 Apr 2011

See all articles by Barry Eichengreen

Barry Eichengreen

University of California, Berkeley; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Gisela Rua

University of California, Berkeley - Department of Economics; Board of Governors of the Federal Reserve System

Date Written: April 13, 2011

Abstract

This paper considers the general equilibrium relationship between exchange rates and global imbalances. It emphasizes that the exchange rate is not a primitive but an equilibrium price determined by the policy mix. It uses extensions of the two-country Obstfeld-Rogoff model to analyze the response of imbalances and real exchange rates to shocks. Finally, it analyzes the characteristics of episodes in which chronic current account surpluses (as opposed to deficits) come to an end.

Keywords: global imbalances, exchange rates, current account, economic rebalancing, global rebalancing

JEL Classification: F0, F3, F4

Suggested Citation

Eichengreen, Barry and Rua, Gisela and Rua, Gisela, Exchange Rates and Global Rebalancing (April 13, 2011). ADBI Working Paper No. 278, Available at SSRN: https://ssrn.com/abstract=1808644 or http://dx.doi.org/10.2139/ssrn.1808644

Barry Eichengreen (Contact Author)

University of California, Berkeley ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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Gisela Rua

Board of Governors of the Federal Reserve System ( email )

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University of California, Berkeley - Department of Economics ( email )

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