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NSIAD-84-68 1 (1984-04-20)

handle is hein.gao/gaobabemu0001 and id is 1 raw text is: REPORT BY THE U S. General Account ig Office Floating Exchange Rates,4 An Interdependent World: No Simple SolutionsTo!A'e Problems The strength of the dollar on foreign exchange markets during 1982 and 1983 had both positive and negative domestic econpmic consequences. On the positive side, a strong dollar contributed to a reduction in the U.S. inflation rate by reducing the dollar cost'of imported goods. Conversely, the strong dollar worsenedthe 1981-82 recession byincreasing the price of U.S. goods in relation to foreign goods, thereby reolucing demand for U.S. production. The strong dollar has been particularly troublesome for U.S. manu- facturers competing with Japanese manufacturers. As a result, the yen- dollar exchange rate became an important subjection the list of U.S.- Japan trade disputes. The yen-dollar exchange rate reflects underlying differences between the U.S. and Japanese economies and respective economic policies. GAO found no support for charges that the Japanese government deliberately engineered an undervalued yen to enhance its international competitiveness. GAO did not review other measures taken by Japan to improve its competitiveness. No simple solutions to the problems of floating exchange rates have emerged. U.S. and foreign economies are now linked by substantial trade flows and the ability of capital to move freely between countries in response to changes in domestic economic policies. Failure to recognize and deal with this interdependence can hurt the U.S. economy and be disruptive to international trade and finance regardless of whether exchange rates are fixed or flexible. ll l12iii!16LUI 124016 <~D S7'~ -:5 0) M! GAO/NIAI-84-68 APRIL 20, 1984 'a,

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