Is the “currency war” an Unsettled Game?

Résumé 0

The financial and economic crisis that began in 2008 has exacerbated the global monetary and financial disorders.In the absence of coordination mechanisms between monetary policies some major economies have issued liquidity through quantitative easing policies, and thereby depreciated their exchange rates, to recover more rapidly from the crisis.The resulting inflow of international liquidity in emerging countries has put some appreciation pressure on their currencies and led to a revival of capital controls.The impact of quantitative easing (QE) policies remains difficult to assess both on developed and emerging countries.In this paper, we aim to contribute to this literature by testing whether the QE measures of the US, British and Japanese central banks have increased exchange rates mis­alignments.To this end we estimate equilibrium exchange rates in panel data, using annual data between 1980 and 2015, for 21 currencies.We then assess the impact of major QE policies on exchange rates misalignments.We find that QE policies have increased misalignments: they appear to delay the correction of misalignments, though the speed of correction remains relatively high.Classification JEL : F31, F33, F42.