WORKING PAPER 07-8
Congress, Treasury, and the Accountability of Exchange Rate Policy: How the 1988 Trade Act Should Be Reformed
by C. Randall Henning, Peterson Institute for International Economics
The controversy within the United States over China’s exchange rate policy has generated a series of legislative proposals to restrict the discretion of the US Treasury Department in determining currency manipulation and to reform the department’s accountability to Congress.
Henning reviews Treasury’s reports to Congress on exchange rate policy and Congress’s treatment of them. He finds that the accountability process has often not worked well in practice: The reports provide only a partial basis for effective congressional oversight. For its part, Congress held hearings on less than half of the reports and overlooked some important substantive issues.
Henning recommends (1) refining the criteria used to determine currency manipulation and writing them into law, (2) explicitly harnessing US decisions on manipulation to the International Monetary Fund’s rules on exchange rates, (3) clarifying the general objectives of US exchange rate policy, (4) reaffirming the mandate to seek international macroeconomic and currency cooperation, (5) requiring Treasury to lead an executivewide policy review, and (6) institutionalizing multicommittee oversight of exchange rate policy by Congress. Legislators should strengthen reporting and oversight of broader exchange rate policy in addition to strengthening the provisions targeting manipulation.
View full document [pdf]
Policy Brief 14-16: Estimates of Fundamental Equilibrium Exchange Rates, May 2014 May 2014
Policy Brief 14-17: Alternatives to Currency Manipulation: What Switzerland, Singapore, and Hong Kong Can Do June 2014
Policy Brief 13-28: Stabilizing Properties of Flexible Exchange Rates: Evidence from the Global Financial Crisis November 2013
Op-ed: Unconventional Monetary Policy: Don't Shoot the Messenger November 14, 2013
Op-ed: Misconceptions About Fed's Bond Buying September 2, 2013
Working Paper 13-2: The Elephant Hiding in the Room: Currency Intervention and Trade Imbalances March 2013
Policy Brief 12-25: Currency Manipulation, the US Economy, and the Global Economic Order December 2012
Working Paper 12-19: The Renminbi Bloc Is Here: Asia Down, Rest of the World to Go?
Revised August 2013
Policy Brief 12-7: Projecting China's Current Account Surplus April 2012
Working Paper 12-4: Spillover Effects of Exchange Rates: A Study of the Renminbi March 2012
Book: Flexible Exchange Rates for a Stable World Economy October 2011
Policy Brief 10-24: The Central Banker's Case for Doing More October 2010
Policy Brief 10-26: Currency Wars? November 2010
Testimony: Correcting the Chinese Exchange Rate September 15, 2010
Book: Debating China's Exchange Rate Policy April 2008
Policy Brief 07-4: Global Imbalances: Time for Action March 2007
Policy Brief 12-19: Combating Widespread Currency Manipulation July 2012
Working Paper 11-14: Renminbi Rules: The Conditional Imminence of the Reserve Currency Transition September 2011
Peterson Perspective: Legislation to Sanction China: Will It Work? October 7, 2011