TY  - JOUR
AU  - Krugman,Paul R.
TI  - Is the Strong Dollar Sustainable?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1644
PY  - 1986
Y2  - December 1986
UR  - http://www.nber.org/papers/w1644
L1  - http://www.nber.org/papers/w1644.pdf
N1  - Author contact info:
Paul R. Krugman
Department of Economics
Princeton University
Woodrow Wilson School
Princeton, NJ  08544
Tel: 609/258-4570
Fax: 609/258-2809
E-Mail: pkrugman@princeton.edu
M1  - published as Paul R. Krugman, 1985. "Is the strong dollar sustainable?," Proceedings, Federal Reserve Bank of Kansas City, pages 103-155. 
 Krugman, Paul R. "Is the Strong Dollar Sustainable?" The U.S. Dollar--Recent Developments, Outlook, and Policy Options, pp. 103-132. Kansas City:  The Federal Reserve Bank of Kansas City, 1985.
M2  - featured in NBER digest on 1985-09-01
AB  - This paper presents evidence strongly suggesting that the current strength of the dollar reflects myopic behavior by international investors; that is, that part of the dollar's strength can be viewed as a speculative bubble. At some point this bubble will burst, leading to a sharp fall in the dollar's value.The essential argument is that given the modest real interest differentials between the U.S. and its trading partners, the dollar'sstrength amounts to an implicit forecast on the part of the market that with high probability the dollar will remain very strong for an extended period. The paper shows that such sustained dollar strength would lead the U.S. to Latin American levels of debt relative to GNP, which is presumably not feasible. Allowing for the possibility that something will be done to bring the dollar down before this happens actually reinforces the argument that the current value of the dollar is unreasonable.
ER  -