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Currency Politics: The Political Economy of Exchange Rate Policy . By Jeffry A. Frieden . Princeton and Oxford : Princeton University Press , 2015. x + 301 pp. Figures, tables, references, index. Cloth, $22.95. ISBN: 978-0-691-17384-9
Book Reviews
Jeffry Frieden has written a thoughtful book investigating the political economy of exchange rate policies. Frieden's expertise is self-evident, and the book is well written, despite arguments and evidence that are complex and potentially intimidating. Frieden frequently applies modern economic theories of exchange rate determination, which--although Frieden does a good job of summarizing the most salient points for nonspecialists--require very close reading. This is indisputably a book written by a sophisticated, technically trained academic for others of the same tribe. Lin-Manuel Miranda will not be adapting it for Broadway.
The book explores how the choice of exchange rate regime affects a nation's different economic interests asymmetrically, the asymmetric effects being most evident and politically controversial in countries integrated into regional and world economies, countries that experience substantial trade and capital flows. In such countries, exchange rate policies become an important political issue pitting interest groups against one another. Producers of traded goods, driven by concern for their competitiveness in international and domestic markets, exert pressure for a low real exchange rate, while producers of nontraded goods and consumers prefer a high real exchange rate that maximizes the purchasing power of domestic consumers. The real exchange rate is not directly controlled by the government, but because adjustment to purchasing power...