Parité euro/dollar et ajustements macro-économiques : que révèle une analyse en termes de change d’équilibre ?

Abstract

Euro/ Dollar Parity and Macro-Economic Adjustments : What Does an Equilibrium Exchange Rate Analysis Show ? This article aims to discern the macro-economic adjustments underlying identifiable exchange-rate misalignments by estimating the nominal equilibrium parity of the dollar vis-à-vis the euro and to highlight the ambiguity surrounding the determinants of the policy mix to be implemented in Europe and the United States. Our chosen theoretical approach is that developed by J. Williamson, who equates equilibrium exchange rates with the real effective exchange rate that enables economies to reach their medium-run internal and external equilibrium simultaneously. The equilibrium bilateral parities of the European currencies vis-à-vis the dollar are calculated by inverting a world trade model derived from a multinational model (NIGEM). A proxy for the euro/dollar exchange rate is then constructed by aggregating six of the European currencies that will join the euro, using their weights in the Ecu basket. Our results show that the dollar is overvalued by 10% in relation to the euro in mid-May 1998. The size of the American current account deficit and the Euro Area’s surplus explain the gap. If the dollar were to remain at today’s level of 5.50 French francs, and the intra-Euro Area parities at their 12 October central rates, then the dollar would be close to its equilibrium parity. This result corresponds to an American target of a 1-GDP-point current account deficit, which is deemed to be the maximum sustainable current account deficit. Assuming that savings will become a key (exogenous) determinant for current account balances, and that savings will come to outweigh more traditional explanatory variables such as cyclical lags and competitiveness differentials, while remaining independent of them, we must then examine the nature of the private savings deficit in the United States. If it is a structural deficit, then the exchange rate is the appropriate adjustment variable for reducing the American current account deficit, even though it would harm European exporters’ price competitiveness. If, on the other hand, the deficit is more cyclical in nature, the problem facing the United States is how well policy mix can regulate the American savings rate, independently of its effects on the real exchange rate. In view of that American authorities’ inability or unwillingness to adopt an appropriate policy mix, and in so far as international co-ordination of economic policies remains highly unlikely, it is up to Euro Area monetary authorities to factor exchange rates into their objectives, at least informally. Under the prevailing conditions, the Euro Area monetary authorities should choose today to undertake a more marked easing of monetary conditions than that just announced by the Fed. harm European exporters’ price competitiveness. If, on the other hand, the deficit is more cyclical in nature, the problem facing the United States is how well policy mix can regulate the American savings rate, independently of its effects on the real exchange rate. In view of that American authorities’ inability or unwillingness to adopt an appropriate policy mix, and in so far as international co-ordination of economic policies remains highly unlikely, it is up to Euro Area monetary authorities to factor exchange rates into their objectives, at least informally. Under the prevailing conditions, the Euro Area monetary authorities should choose today to undertake a more marked easing of monetary conditions than that just announced by the Fed.