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Trade-imbalances networks and exchange rate adjustments: the paradox of a new Plaza. The XIVth Spring Meeting of Young Economists (SMYE-2009), Istanbul, April 2009

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  • Andrea Fracasso

    (Department of Economics (trento))

  • Stefano Schiavo

    (Department of Economic Geography)

Abstract

This paper addresses the issue of a coordinated adjustment plan (“new Plaza") to close global imbalances. We show that the complexity of the network of bilateral trade imbalances has increased, revealing that any plan focusing on industrialised countries only is likely to be ineffective. By proposing new effective exchange rate measures based on bilateral imbalances, we show that exchange rate movements against debtor and creditor countries have not been consistent with the simultaneous closing of all bilateral positions. The difficulty to orchestrate a plan involving many partners is thus matched by the apparent inability of uncoordinated adjustments to close the imbalances.

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Paper provided by Sciences Po in its series Sciences Po publications with number info:hdl:2441/10028.

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Date of creation: Apr 2009
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Handle: RePEc:spo:wpmain:info:hdl:2441/10028

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Related research

Keywords: Plaza agreement; exchange rates; global imbalances; network analysis;

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