Why is the dollar so high?
By: Martin Feldstein.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- no. 13114.; Working paper series (National Bureau of Economic Research) -- working paper no. 13114.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 15
Subjects: Dollar, American; Currency question -- United States; Equilibrium (Economics)
Description: The level of the dollar is part of a complex general equilibrium system. Nevertheless, it is helpful to recognize that the high level of the dollar is necessary to generate the current account deficit equal to the difference between national saving and investment. Understanding the high level of the dollar therefore requires understanding the reasons for the low level of national saving in the United States. Reducing the large current account deficit will require both a higher rate of national saving and a more competitive dollar. Although the necessary decline in the real value of the dollar can in theory occur without a decline in the dollar's nominal value, the implied magnitude of the fall in the domestic price level is implausible. A decline of the real value of the dollar that is large enough to reduce the current account deficit significantly requires a significant decline in the nominal value of the dollar.
Notes: "May 2007"

Includes bibliographical references (p. 14-15).

Also available in PDF from the NBER world wide web site (www.nber.org).