IMF and World Bank disagree about competitive devaluations

Jon Economy, Market Commentary, War

China’s decision to tweak its exchange rate peg with the dollar in August provoked reactionary howls of derision — from the United States to India—that Beijing was gearing up for a new wave of international currency warfare.
But do currency wars really work?
Ahead of its bi-annual World Economic Outlook in Peru this week, the International Monetary Fund has waded into the debate. It published a comprehensive set of findings confirming that weaker currencies are still an effective tool for economies to grow their way out of trouble.
An exchange rate depreciation of around 10 percent, said the IMF, results on average in a rise in exports that will add 1.5 percent to an economy’s output.
But both the research and the timing are not uncontroversial.

This post was published at The Telegraph