Thursday, May 7, 2015
Everyone loses in a Currency War by Nouriel Roubini
IN A world of weak domestic demand in many advanced economies and emerging markets, policy makers have been tempted to boost economic growth and employment by going for export-led growth. This requires a weak currency and conventional and unconventional monetary policies to bring about the required depreciation.
Since the beginning of the year, more than 20 central banks have eased monetary policy, led by the European Central Bank (ECB) and the Bank of Japan (BOJ).
In the eurozone, countries on the periphery needed currency weakness to reduce their external deficits and jump-start growth.
But the euro weakness triggered by quantitative easing has further boosted Germany’s current-account surplus, which was already a whopping 8% of gross domestic product (GDP) last year.
With external surpluses also rising in other countries of the eurozone core, the monetary union’s overall imbalance is large and growing.
Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics