The impact of exchange-rate fluctuations on trade policy

The aim of this Briefing Paper is to set out in detail the issues connected with the undervaluation policies being practised by the European Union's main trading partners. The first part of the study describes the exchange-rate strategies of these countries and examines the domestic impact of this on the main economic variables (growth, inflation, foreign accounts). The second part assesses how the exchange-rate policies practised by the EU's trading partners are affecting the European economies. Finally, the last part shows that the problem of currency undervaluation requires a multilateral response: the IMF and the WTO have to cooperate in order to ensure exchange-rate stability.

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