The threat of 'currency wars': global imbalances and their effect on currencies

Within the context of persisting international imbalances and a lingering crisis, there has been increased focus on the exchange rates between major economic areas, taking for example the heated debate between the US and China and unilateral action by numerous countries. It currently seems that a quantitative easing boom is back on the agenda globally. Inevitably, such policy actions will have effects on the global flows of capital and trade and have already attracted strong criticism from some emerging countries such as Brazil which complain about the loss of competiveness caused by the appreciation of their currency. The Monetary Experts Panel of ECON was asked help the European Parliament's ECON Committee understand the implications of the above mentioned developments. Consequently, in this compilation, the motives and policy options available to major economic actors with regard to their exchange rate and current accounts. Very importantly, the question on the impact on the euro area is raised, i.e. how the euro area can avoid remaining too passive and being the loser in these policy actions of global importance.