Pros And Cons Of Currency War

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The phrase “Currency War” was used to describe the efforts of nations to devalue their own currencies, in order to increase their competitiveness of export in the international market. In the context of the reading, major players in the currency war from 2010 to 2013 included the U.S., European countries, China, Switzerland, and Japan, each using different ways in devaluing the domestic currency: the US printed a lot of money via quantitative easing (QE) ; China controlled capital inflows through accumulating foreign currency reserve and undervaluing renminbi; Switzerland prohibited the franc to appreciate further against the euro; and Japan announced the unlimited purchasing of government bonds-which increases money supply-to counter economic downturn. Opponents contended that policy decisions such as QE are “beggar-they-neighbor” actions- while they eased domestic economic downturn in the developed countries alone, the price of such behavior was to be shifted to the international market and particularly, the emerging markets. Firstly, currency wars might lead to increased forms of protectionism by countries with overvalued currencies to revive their economies, including tariffs and import quotas, both as a retaliatory political action and as…show more content…
Later in the same year, the G20 also agreed that “developing countries should have even greater freedom to use capital controls than the IMF guidelines allow.” Foreseeably, as long as a floated exchange rate is commonly adopted in the international society, while emerging markets uses capital control to respond to volatile capital inflow, the discussion on currency wars and capital controls would continue in the
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