The dollar rose by about 35 percent in real terms from 1995 through the end of 2001, supporting the booming US economy of the late 1990s but pushing the current account deficit to a record high of almost 5 percent of GDP. This special report provides alternative views of how large a dollar depreciation would be needed to restore a sustainable position (Jim O'Neill, Michael Rosenberg, and Catherine Mann), analyzes the impact of currency misalignments on each of the three major economies (Martin Baily for the United States, William Cline for Japan, and Daniel Gros for Euroland), and discusses the role of exchange market intervention in addressing the issues (Kathryn Dominguez, Edwin M. Truman, and Ernest Preeg).
1. Features of a Dollar Decline
2. The Dollar's Equilibrium Exchange Rate: A Market View
Michael R. Rosenberg
3. How Long the Strong Dollar?
Catherine L. Mann
4. The Dollar and US Trade Politics
5. Persistent Dollar Swings and the US Economy
Martin Neil Baily
6. Impact of the Strong Dollar on the US Auto Industry
G. Mustafa Mohatarem
7. The Overvalued Dollar and the US Slump
Thomas I. Palley
8. All Eyes on the Dollar
Stephen S. Roach
9. The Impact of US External Adjustment on Japan
William R. Cline
10. The Dollar and the European Economy
11. Foreign Exchange Intervention: Did It Work in the 1990s?
Kathryn M. Dominguez
12. The Limits of Exchange Market Intervention
Edwin M. Truman
About the Contributors