Exchange Rates: The Dollar in International Markets

Exchange Rates: The Dollar in International Markets

Date: April 17, 1987
Creator: Wilson, Arlene
Description: Mainstream economic theory suggests that U.S. budget deficit was the main cause of the dollar appreciation between 1980 and early 1985. The high budget deficit forced the U.S. Government to compete against the private sector for available savings, raising interest rates in the United States. In response, net capital inflows to the United States increased, the demand for dollars on the foreign exchange market went up, and the dollar appreciated. Restrictive budgets and loose monetary policies abroad, both of which kept interest rates low abroad, also contributed to the dollar’s appreciation on over this period.
Contributing Partner: UNT Libraries Government Documents Department