Accountability and Oversight of US Exchange Rate Policy by C. Randall Henning

By C. Randall Henning

The dispute over chinese language trade cost coverage in the usa has generated a chain of legislative proposals to limit the discretion of the U.S. Treasury division in selecting forex manipulation and to reform the department's responsibility to the Congress. This examine stories the Treasury's reviews to the Congress on trade fee coverage brought by way of the 1988 alternate act and Congress's therapy of them. It reveals that the responsibility approach has usually now not labored good in perform: The insurance of the stories has occasionally been incomplete and never supplied a enough foundation for congressional oversight. Nor has Congress continually played its personal position good, retaining hearings on lower than half the studies and overlooking very important significant concerns. numerous techniques can enhance counsel to the Treasury, criteria for review, and congressional oversight. those contain (1) refining the standards used to figure out forex manipulation and writing them into legislations; (2) explicitly harnessing US judgements on manipulation to the IMF's principles on trade charges; (3) clarifying the overall goals folks trade fee coverage; (4) reaffirming the mandate to hunt foreign macroeconomic and forex cooperation; and (5) institutionalizing multicommittee oversight of trade cost coverage through Congress. As they advance laws focusing on manipulation, additionally, legislators usually are not lose sight of the wider reasons of the 1988 act in terms of the potent valuation of the buck, the present account, and their ramifications for the USA economic climate total.

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Sample text

Bush administration treated the connection between fiscal policy and the current account balances cursorily until late 1992. 3 percent to just over 3 percent of GDP from 1983 to 1988 and duly reported the advice of the IMF in the Article IV consultations to reduce the deficit further (US Treasury report, October 1988, 4, 36). The reports that followed noted deficit reduction agreements between the president and Congress and argued that these agreements would contribute to macroeconomic policy coordination in the G-7, the relevant sections of whose communiqués were summarized.

This episode generates several observations. First, the manipulation provisions of the 1988 Act do not mandate negotiations in cases of overvaluation; they are asymmetrical. Second, the peso crisis demonstrates that overvalued currencies can pose as much risk to the US economy as undervalued currencies. However, in contrast to the cases of undervaluation in East Asia during 1988–94, Treasury did not find the reports to be a useful vehicle to cajole Mexico toward greater exchange rate flexibility.

Ch02_15047_Peterson_Henning 6/3/08 8:59 PM Page 13 financial analysts, independent policy analysts, and private-sector lobbying groups, among other sources. Information regarding policy, policy intentions, and international negotiations, however, is more closely held within the official sector. On this dimension in particular, Congress has not always had sufficient information to exercise effective oversight. Debate over the Role of Congress A normative debate exists over the appropriate degree of “democratization” of exchange rate policy despite the legislature’s constitutional standing in this area.

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