Is a strong currency better than a weak currency?

Scott Wolla of St Louis Fed has a piece on the topic. He argues the case for USD but is applicable for most (if not all) currencies.

The main idea is in terms of currency, difficult to say whether strong or weak currency is good for economy:

The implications of words such as “strong” and “weak” can mislead people to believe that an appreciating currency is always better for the economy than a depreciating currency, but this is not the case. In fact, there is no simple connection between the strength of a country’s currency and the strength of its economy. However, the value of the dollar relative to other currencies does affect individuals differently. Other things equal, a stronger dollar makes U.S. goods relatively more expensive for foreigners, which benefits U.S. consumers of foreign goods (imports) and hurts American exporters and American firms that might not export but do compete with imports. In addition, a weaker dollar makes foreign goods (imports) relatively more expensive for American consumers, which benefits exporters of U.S. goods and American firms that compete with imports. 

 

 

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