Unless the global financial system is radically reformed – and the necessary reforms are looking increasingly unlikely to occur – it will continue to be conducive to financial crises. Government rhetoric and actions can often influence in desirable ways both the speculative actions that now determine the exchange rate and the effect of exchange rate movements on the domestic economy. Managing the exchange rate should start with Australian support for measures such as the Tobin tax that dampen speculation. In 2008 and 2009, exchange rate changes were helpful in reducing the impact of the global financial crisis on Australia, largely because of a very clear commitment by the Australian government to make preservation of jobs its top priority. In 2009, a rapid rise in the exchange rate was unhelpful. In the short run, little can be done about this, but in the longer run, it is possible to offset the adverse effects.

The use of exchange rates based on Purchasing Power Parities to compare incomes across countries and over time has now become standard practice. But there are reasons to believe that this could lead to excessively inflated incomes for poorer countries and in some cases also inflate the extent of real changes over time. Estimates of gross domestic product growth in the Chinese and Indian economies in recent years provide examples of this.

Research on Africa’s monetary history has tended to focus on the imposition of colonial currencies while neglecting the monetary upheavals which faced the colonial powers after the collapse of the gold standard during World War I. Gardner profiles three crises—in The Gambia, Kenya, and Liberia—resulting from shifting exchange rates between European currencies during the 1920s and 1930s. These three cases illustrate the degree to which colonial policies struggled to keep up with the economic turmoil affecting metropolitan states and bring Africa into the story of global monetary instability during the interwar period, which is often told only from a European perspective.

Foundational theories of trade politics emphasize a conflict between consumer welfare and protectionist lobbies. But these theories ignore other powerful lobbies that also shape trade policy. We propose a theory of trade distortion arising from conflict between consumer welfare and importer lobbies. We estimate the key parameter of the model—the government's weight on welfare—using original data from Venezuela, where Hugo Chávez used an exchange-rate subsidy to underwrite hundreds of billions of dollars of imports. Whereas estimates from traditional models would make Chávez look like a welfare maximizer, our results indicate that he implemented distortionary commercial policy to the benefit of special interests. Our analysis underscores the importance of tailoring workhorse models to account for differences in interest group configuration. The politics of trade policy is not reducible to the politics of protectionism.

With the future of liberal internationalism in question, how will China's growing power and influence reshape world politics? We argue that views of the Liberal International Order (LIO) as integrative and resilient have been too optimistic for two reasons. First, China's ability to profit from within the system has shaken the domestic consensus in the United States on preserving the existing LIO. Second, features of Chinese Communist Party rule chafe against many of the fundamental principles of the LIO, but could coexist with a return to Westphalian principles and markets that are embedded in domestic systems of control. How, then, do authoritarian states like China pick and choose how to engage with key institutions and norms within the LIO? We propose a framework that highlights two domestic variables—centrality and heterogeneity—and their implications for China's international behavior. We illustrate the framework with examples from China's approach to climate change, trade and exchange rates, Internet governance, territorial sovereignty, arms control, and humanitarian intervention. Finally, we conclude by considering what alternative versions of international order might emerge as China's influence grows.

In this article, we analyze the impact of varying exchange rates on French wine exports using a dynamic Armington panel model for the time period from 2000 to 2011. Our results suggest that French wines have become less competitive during the 2000s. This is due to two factors: rising domestic wine prices relative to foreign competitors and the appreciation of the euro against the USD and the GBP. Chinese demand appears to be a key driver of French wine exports. In addition, we find some compositional effects in Bordeaux wine exports. In response to the appreciation of the euro, the share of high-priced wines has increased, suggesting some degree of quality sorting in response to exchange-rate changes. (JEL Classification: F14, F31, Q17)

We study the exchange rate effects of monetary policy in a balanced macroeconometric two-country model for the United States and United Kingdom. In contrast to the empirical literature, which consistently treats the domestic and foreign countries unequally in the modeling process, we consider full model feedback, allowing for a thorough analysis of the system dynamics. The problem of model dimensionality is tackled by invoking the approach by Aoki (1981). Assuming country symmetry in the long run allows to decouple the two-country macrodynamics of country averages and differences such that the cointegration analysis can be applied to smaller systems. Second, the econometric modeling is general-to-specific, a graph-theoretic approach for the contemporaneous effects combined with automatic general-to-specific model selection. We find delayed overshooting of the exchange rate in the case of a Bank of England monetary shock but instantaneous response to a Fed shock. Altogether the response is more pronounced in the former case.

Real exchange rate movements are robustly related to the rise and fall of trade protectionism. I demonstrate this by presenting a theoretical model that incorporates the real exchange rate into a standard factor proportions model of trade policy preferences. The model demonstrates why some firms' trade policy preferences, and thus total demands for protectionism, change in response to real exchange rate movements. I evaluate the model with data on antidumping investigations in six industrialized countries between the late 1970s and 2004. The exercise suggests that the real exchange rate hypothesis offers a more compelling explanation for protectionist waves than the business cycle hypothesis.

The globalization of production and finance is responsible for much of the variation in political contestation over exchange rates since the end of Bretton Woods. On the one hand, globalization increases the salience of the policy decisions that affect exchange rates, as more firms and their workers engage more in international trade and compete more against imports. On the other hand, globalization offers firms a myriad of opportunities to manage their exchange rate risk, through operational and financial hedging. But hedging is available to only certain types of economic actors and in certain situations of exchange rate risk. In this way, globalization has redrawn traditional political cleavages on exchange rates. This argument is tested with an original survey of US firms, labor unions, and trade associations on their preferences and political activity on exchange rate policy.

While it is generally accepted that change in the real value of the dollar is an important determinant of exports, it has not been rigorously demonstrated that this relationship, derivable from theory, holds empirically for agricultural exports and the components of agricultural exports. Starting with a dynamic maximizing framework, this paper estimates the real trade-weighted exchange rate and trade partner income effects on U. S. agricultural exports. For the period 1970–2006, a one percent annual increase in trade partners’ income is found to increase total agricultural exports by about 0. 75 percent, while a one percent appreciation of the dollar relative to trade partner trade-weighted currencies decreases total agricultural exports by about 0. 5 percent. While these effects carry over to 12 commodity subcategories, they are conditioned by differences between bulk and high value commodities, and differences in the export demand from high compared to low income countries. We use a directed acyclic graphs (DAG) technique to identify the inverted fork causal relationships from vector autoregression (VAR) models. We also find that there is an asymmetric exchange rate effect so that the negative effect of exchange rate appreciation on exports sometimes dominates the positive effect of foreign income growth.

In 1922, British colonial Gambia demonetized the French 5-franc coin, which had been legal tender at a fixed rate in the colony since 1843. Until World War I, this rate was close to the international rate under the gold standard. When the franc began to depreciate in 1918, however, a gap emerged between the Gambian rate and the international rate, prompting a rapid influx of the coins. The demonetization cost the colonial administration over a year's revenue, affecting the later development of the colony. The 1920s have long been a fruitful period for the study of monetary history owing to the instability of exchange rates during and after the war. This article extends the study of this period to examine the impact of these changes on dependent colonies in West Africa, highlighting the importance of local compromises and particularities in colonial monetary systems.