The threat of "currency wars": A European perspective

Darvas, Zsolt and Piasni-Ferry, Jean (2010) The threat of "currency wars": A European perspective. Working Paper. BCE Matematikai Közgazdaságtan és Gazdaságelemzés tanszék, Budapest.

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This paper was prepared as a briefing paper for the European Parliament Economic and Monetary Affairs Committee’s Monetary Dialogue, entitled “The threat of ‘currency wars’: global imbalances and their effect on currencies,” held on 30 November 2010. Copyright remains with the European Parliament at all times.


The ‘currency war’, as it has become known, has three aspects: 1) the inflexible pegs of undervalued currencies; 2) recent attempts by floating exchange-rate countries to resist currency appreciation; 3) quantitative easing. Europe should primarily be concerned about the first issue, which relates to the renewed debate about the international monetary system. The attempts of floating exchange-rate countries to resist currency appreciation are generally justified while China retains a peg. Quantitative easing cannot be deemed a ‘beggar-thy-neighbour’ policy as long as the Fed’s policy is geared towards price stability. Current US inflationary expectations are at historically low levels. Central banks should come to an agreement about the definition of price stability at a time of deflationary pressures. The euro’s exchange rate has not been greatly impacted by the recent currency war; the euro continues to be overvalued, but less than before.

Item Type:Monograph (Working Paper)
Uncontrolled Keywords:currency war, quantitative easing, currency intervention, international monetary system, JEL: E52; E58; F31; F33
Divisions:Faculty of Economics > Department of Mathematical Economics and Economic Analyses
Subjects:Economic policy
International relations
ID Code:305
Deposited By: Ádám Hoffmann
Deposited On:09 Mar 2011 13:23
Last Modified:18 Oct 2021 09:31

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