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But the primary reason for wanting the dollar to become more competitive in the near future is that we may need an increase in exports this year and in 2007 to sustain the economy's current pace of expansion.
Martin Feldstein
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Martin Feldstein
Age: 79 †
Born: 1939
Born: November 25
Died: 2019
Died: June 11
Economist
Former Chairman Of Council Of Economic Advisers
Professor
University Teacher
New York City
New York
Martin S. Feldstein
Martin Stuart Feldstein
Year
Pace
Future
Current
Exports
Become
Currents
Sustain
May
Wanting
Expansion
Reason
Near
Dollar
Need
Dollars
Competitive
Needs
Increase
Primaries
Years
Economy
Primary
More quotes by Martin Feldstein
We pay some price when necessary to bring down inflation but that price is temporary and is not large relative to the permanent gain from reduced inflation.
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After all, an overvalued dollar gives us the ability to buy foreign goods at lower prices. And the existing volume of exports brings more yen and euros than they would if the dollar were more competitive.
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A second reason why science cannot replace judgement is the behavior of financial markets.
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Homeowners who refinanced their mortgages took out cash and reduced their monthly payments at the same time. Much of the cash obtained by refinancing was spent on consumer durables, home improvements and the like.
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Inflation is lower and more stable and the real business cycle fluctuations are more modest.
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In short, both experience and economic theory imply that the US could now t to a more competitive dollar without experiencing either increased inflation or decreased economic growth.
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First, I think the science of monetary economics has clearly gotten better.
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The only way that we can reduce our financial dependence on the inflow of funds from the rest of the world is to reduce our trade deficit.
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Even if the dollar does decline during the coming months, the delays in the response of exports and imports to the more competitive dollar will mean that the increase in aggregate demand from this source may not happen for a year or more.
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