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From Neglect to Activism: American Politics and the 1985 Plaza Accord*

Published online by Cambridge University Press:  07 April 2017

C. Randall Henning  and
I. M. Destler
C. Randall Henning
Affiliation:
Political Scientist, Institute for International Economics, Washington DC
I. M. Destler
Affiliation:
School of Public Affairs, University of Maryland
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Abstract

US exchange rate policy shifted in 1985 from unilateralist nonintervention to actively promoting dollar depreciation and multilateral cooperation. Pressures from producer interests, particularly multinational companies making manufactured goods, and from sympathetic members of Congress were the most important of multiple forces pushing the US Treasury toward dollar depreciation. Once the Treasury had chosen an activist course, a multilateral strategy had several benefits over a unilateral approach to depreciation. It could better counter the immediate threat to Administration trade policy from Congress, orchestrate depreciation, strengthen Treasury's influence within Washington and shift the burden of adjustment away from US fiscal policy, then frozen, onto other governments. When the trade account is in balance, individual policymakers have flexibility in determining exchange rate policy. But when large trade deficits arise, the domestic political pressures of trade-exposed sectors will dominate personalities and ideas.

Type
Articles
Information
Journal of Public Policy , Volume 8 , Issue 3-4 , July 1988 , pp. 317 - 333
Copyright
Copyright © Cambridge University Press 1988

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