At the root of the Euro crisis was not only a sovereign debt crisis, but also a balance-of-payments crisis. A multi-faceted approach is required to restore the euro-area economy back to a sustainable growth path. * The euro-area crisis has often been characterised as a sovereign debt crisis. Indeed, it was triggered by a sudden […]
In his most recent speech, Donald Kohn, vice-chairman of the US Federal Reserve, said that the Fed had learned that the aftermath of a bubble can be far more painful than it had imagined.
He then carefully examined alternative strategies for monetary policy to deal with asset price bubbles. However, he did not specifically discuss a potential role of foreign exchange rates in the aftermath of a bubble in supporting aggregate demand through their influence on exports.