Photo: LM Otero Associated Press
The u.s. dollar is associated with a 23% sales of goods and services between the countries, while the United States only account for 10% of world trade.
The omnipresence of the american dollar in trade and finance plombera the global economic recovery, warns the IMF.
In theory, one of the advantages of having a currency whose exchange rate is fixed by the law of supply and demand (floating exchange rate) is that in times of recession, it naturally boosts the economic recovery. Indeed, as the darkening economic outlook of a country makes its currency less attractive to investors and reduces, therefore, the value relative to other currencies, exports of goods and services will become cheaper overseas and sell better. The effect should be the same for the tourism, foreign visitors, enjoying particularly the destinations giving them greater purchasing power.
Unfortunately, the disproportionate share they occupy in the global economy a few currencies dominate, including the american greenback, will have the opposite effect in many countries during the current crisis of the COVID-19, reports a new study unveiled Monday by the international monetary Fund (IMF), particularly in developing economies.
Indeed, as the price of a large part of the exports and imports of these countries are set in dollars, they do not adjust to the economic reality that local, ” note the researchers. In fact, not only these countries have not seen an increase in their sales abroad, but the cost of their imports, as well as loans from governments and their enterprises has also increased with the flight of investors towards safe assets, like u.s. currency, which, it is appreciated.
A disproportionate share of the burden
Based on a new tool to better monitor these dynamics, the IMF study finds that even outside of the world market of raw materials — where he reigns as king and master, the us dollar is associated with almost one-quarter (23 %) of sales of goods and services between the countries, while the United States does not intend to, themselves, that for 10% of world trade. Its weight is no less considerable on the side of finance, where he held, for example, two-thirds of the bond market, global, estimated last year the Bank of England.
The beneficial effects of floating exchange rate should, however, be felt in some important sectors of the economy, starting with tourism. Unfortunately, notes the IMF, the latter is also one of the hardest hit by the crisis caused by the pandemic of sars coronavirus.
This is not yesterday that we emphasize, and even that one regrets, the importance is disproportionate and destabilizing the greenback in the global economy, said last summer the former chief economist of the IMF, and Maurice Obstfeld, at the great annual meeting of central bankers in Jackson Hole, Wyoming. The election and economic policies erratic, the american president Donald Trump contributed to add weight to these criticisms. “When the United States was seen as a leader responsible for the global economy, it was less perceived as a problem,” he observed.
The time is more ripe for countries to agree on a new “currency” hegemonic “synthetic” which would be backed by a basket of currencies, like special drawing rights (SDRS) of the IMF, had suggested then the governor of the Bank of England, Mark Carney.
By then, it is to be hoped that the countries end up, at least ” medium-term “, by enjoying the economic benefits brought about by the weakening of their currencies, conclude the authors of the IMF study. But in the meantime, they will have to rely on stimulus policies of their governments and their central banks.