"Even if the dollar does decline during the coming months, the delays in the response of exports and imports to the more competitive dollar will mean that the increase in aggregate demand from this source may not happen for a year or more"
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Feldstein is draining the romance out of a favorite political fairytale: devalue the currency, watch exports roar, problem solved. His point is colder and more operational. Even if policymakers get the exchange rate they want, the real economy moves on a different clock. Trade flows don’t pivot on a dime because companies are locked into contracts, supply chains, shipping schedules, product standards, and long-planned investment decisions. A “more competitive dollar” changes the math on paper immediately, but it takes time for firms to reprice, re-source, renegotiate, and reorient where they sell.
The intent is partly diagnostic, partly disciplinary. Feldstein is warning officials not to declare victory the moment the dollar slips, and not to overpromise stimulus from net exports in the next quarter or two. The subtext is a critique of macroeconomic impatience: Washington wants quick levers; the external sector offers slow ones. That lag matters because it exposes the economy to a dangerous gap period - policymakers may loosen policy expecting an export-led boost that doesn’t arrive, or they may tighten too soon when they misread temporary trade numbers as a trend.
Contextually, Feldstein is speaking from the era when exchange rates were treated as a central instrument of adjustment, especially in debates over U.S. trade deficits and global imbalances. He’s invoking what economists call the “J-curve” logic without jargon: the currency can move first, while quantities - what we actually buy and sell across borders - follow later, if they follow at all. The real warning is about sequencing, not ideology.
The intent is partly diagnostic, partly disciplinary. Feldstein is warning officials not to declare victory the moment the dollar slips, and not to overpromise stimulus from net exports in the next quarter or two. The subtext is a critique of macroeconomic impatience: Washington wants quick levers; the external sector offers slow ones. That lag matters because it exposes the economy to a dangerous gap period - policymakers may loosen policy expecting an export-led boost that doesn’t arrive, or they may tighten too soon when they misread temporary trade numbers as a trend.
Contextually, Feldstein is speaking from the era when exchange rates were treated as a central instrument of adjustment, especially in debates over U.S. trade deficits and global imbalances. He’s invoking what economists call the “J-curve” logic without jargon: the currency can move first, while quantities - what we actually buy and sell across borders - follow later, if they follow at all. The real warning is about sequencing, not ideology.
Quote Details
| Topic | Money |
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