In the first half of the eighties economists devoted a considerable amount of resources to try to explain the persistent tendency of the exchange rate of the dollar to appreciate. More recently the emphasis of the analysis has shifted on the following two issues: (i) why the US current account and trade imbalances have not been redressed despite the enormous depreciation of the dollar, occurred since March 1985, and (ii) which policy actions should have to be followed for fostering the adjustment process.
The draft of this paper was presented at a seminar held at the Bank of Greece in June 1988 and at the Department of Political Economy of the University of Rome in January 1989.
