Exchange rates affect the price of every country's imports and exports, as well as the value of every overseas investment. Following the global financial crisis of 2008-2009 and ensuing economic recession, disagreements among countries over exchange rates became more widespread. At the heart of disagreements is whether or not countries are using exchange rate policies to undermine free markets and intentionally push down the value of their currency in order to gain a trade advantage at the expense of other countries. A weak currency makes exports cheaper to foreigners, which can lead to higher exports and job creation in the export sector. There can also be implications for other countries. In general, exporters and firms producing import-sensitive goods may find it harder to compete against countries with weak currencies. Consumers and businesses that rely on inputs from abroad may benefit when other countries have weak currencies, because imports may become cheaper. The United States has found itself on both sides of debates over exchange rates. On one hand, some Members of Congress and U.S. policy experts argue that U.S. exports and U.S. jobs have been adversely affected by the exchange rate policies adopted by China, Japan, and a number of other countries. On the other hand, some emerging markets, notably Brazil, argued during the global financial crisis that expansionary monetary policies in the United States and other developed countries caused the currencies of developed countries to depreciate, hurting the competitiveness of emerging markets. However, these concerns have diminished as the dollar has strengthened in recent months. Through the International Monetary Fund (IMF), countries have committed to avoid "currency manipulation." There are also provisions in U.S. law to address "currency manipulation" by other countries. In the context of recent disagreements, neither the IMF nor the U.S. Treasury Department has determined any country to be manipulating its exchange rate. There are differing views on why. Some argue that countries have not engaged in policies that violate international commitments on exchange rates or triggered provisions in U.S. law relating to currency manipulation. Others argue that currency manipulation has occurred, but that estimating a currency's "fundamental" value is complicated, and that the provisions do not effectively respond to exchange rate disputes.

Exchange rates are important in the international economy, because they affect the price of every country's imports and exports, as well as the value of every overseas investment. Following the global financial crisis of 2008-2009 and ensuing economic recession, disagreements among countries over exchange rates have become more widespread. Some policy leaders and analysts contend that there is a "currency war" now underway among certain countries.

Exchange rates are important in the international economy, because they affect the price of every country's imports and exports, as well as the value of every overseas investment. Following the global financial crisis of 2008-2009 and ensuing economic recession, disagreements among countries over exchange rates have become more widespread. Some policy leaders and analysts contend that there is a "currency war" now underway among certain countries. At the heart of current disagreements is whether or not countries are using exchange rate policies to undermine free markets and intentionally push down the value of their currency in order to gain a trade advantage at the expense of other countries. A weak currency makes exports cheaper to foreigners, which can lead to higher exports and job creation in the export sector. However, if one country weakens its currency, there can be implications for other countries. In general, exporters and firms producing import-sensitive goods may find it harder to compete against countries with weak currencies. However, consumers and businesses that rely on inputs from abroad may benefit when other countries have weak currencies, because imports may become cheaper. The United States has found itself on both sides of the current debates over exchange rates. This book provides an overview of exchange rate and currency debate issues and global monetary policy.

The politics surrounding exchange rate policies in the global economy The exchange rate is the most important price in any economy, since it affects all other prices. Exchange rates are set, either directly or indirectly, by government policy. Exchange rates are also central to the global economy, for they profoundly influence all international economic activity. Despite the critical role of exchange rate policy, there are few definitive explanations of why governments choose the currency policies they do. Filled with in-depth cases and examples, Currency Politics presents a comprehensive analysis of the politics surrounding exchange rates. Identifying the motivations for currency policy preferences on the part of industries seeking to influence politicians, Jeffry Frieden shows how each industry's characteristics—including its exposure to currency risk and the price effects of exchange rate movements—determine those preferences. Frieden evaluates the accuracy of his theoretical arguments in a variety of historical and geographical settings: he looks at the politics of the gold standard, particularly in the United States, and he examines the political economy of European monetary integration. He also analyzes the politics of Latin American currency policy over the past forty years, and focuses on the daunting currency crises that have frequently debilitated Latin American nations, including Mexico, Argentina, and Brazil. With an ambitious mix of narrative and statistical investigation, Currency Politics clarifies the political and economic determinants of exchange rate policies.

The exchange rate is a crucial variable linking a nation's domestic economy to the international market. Thus choice of an exchange rate regime is a central component in the economic policy of developing countries and a key factor affecting economic growth. Historically, most developing nations have employed strict exchange rate controls and heavy protection of domestic industry-policies now thought to be at odds with sustainable and desirable rates of economic growth. By contrast, many East Asian nations maintained exchange rate regimes designed to achieve an attractive climate for exports and an "outer-oriented" development strategy. The result has been rapid and consistent economic growth over the past few decades. Changes in Exchange Rates in Rapidly Developing Countries explores the impact of such diverse exchange control regimes in both historical and regional contexts, focusing particular attention on East Asia. This comprehensive, carefully researched volume will surely become a standard reference for scholars and policymakers.

Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer’s currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) the terms-of-trade is stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports, driven by the dollar exchange rate while exports respond weakly, if at all; (e) strengthening of the dominant currency relative to non-dominant ones can negatively impact global trade; (f) optimal monetary policy targets deviations from the law of one price arising from dominant currency fluctuations, in addition to the inflation and output gap. Using data from Colombia we document strong support for the dominant currency paradigm.

This book takes a global approach by discussing one of today's most controversial topics in business; dollarization. Since the collapse of the Soviet Union, and the formation of the Euro, many countries are debating whether or not a common currency is in their best interest.