Accountability and Oversight of US Exchange Rate Policy

C. Randall Henning, Peterson Institute

Peterson Institute for International Economics, Washington, DC

June 19, 2008

The Peterson Institute released a new study, Accountability and Oversight of US Exchange Rate Policy, at a meeting held June 19, 2008. Motivated by recent controversies over Chinese exchange rate policy and proposals by lawmakers for new trade remedies for currency manipulation, author C. Randall Henning's study examines the system of Treasury reports established by the exchange rate provisions of the Omnibus Trade and Competitiveness Act of 1988 and Congress's follow-up on them. He finds that the accountability process has not worked well in practice: The coverage of the reports has been incomplete and has not provided a basis for firm congressional oversight. As lawmakers consider changes to the 1988 Act, this new study recommends (1) refining the criteria used to determine currency manipulation, (2) clarifying Treasury's mandate with respect to exchange rate policy, and (3) regularizing multi-committee oversight by Congress. These measures can be implemented in ways that reinforce the International Monetary Fund's exchange rate norms and rules and would bolster the accountability of US policy and the legitimacy of the international monetary system.

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