The International Monetary Fund on Wednesday warned against governments trying t...
WASHINGTON - The International Monetary Fund on Wednesday warned against governments trying to weaken their currencies through monetary easing or market interventions, arguing in a blog post that this would hurt the functioning of the international monetary system and make all nations worse off.
“One should not put too much stock in the view that easing monetary policy can weaken a country’s currency enough to bring a lasting improvement in its trade balance through expenditure switching. Monetary policy alone is unlikely to induce the large and persistent devaluations that are needed to bring that result,” IMF chief economist Gita Gopinath and IMF researchers Gustavo Adler and Luis Cubeddu said in the post.
The IMF researchers said that one problem for the limitations of impacts of U.S. currency fluctuations on the trade balance is that many U.S. imports from China and other countries are invoiced in dollars, not local currencies. The U.S. Treasury has declared China a currency manipulator and requested that the IMF work with it to “correct” the situation.
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