In September 1985, emissaries of the world's five leading industrial nations—the United States, Britain, France, Germany, and Japan—secretly gathered at the Plaza Hotel in New York City and unveiled an unprecedented effort to correct the largest set of current account and exchange rate imbalances that had ever threatened the world economy. The Plaza Accord is credited with sharply realigning exchange rates, significantly reducing current account imbalances, and countering protectionist pressures in the United States. But did the Accord provide a foundation for ongoing international financial stability and policy coordination? Or was it simply a unique one-time coincidence of national interests?
The Plaza experience continues to inform today's debates about the limits and possibilities of international monetary cooperation. In late 2015, leading policymakers and economists—including those who were involved in the Accord's design, negotiation, and implementation—held a Plaza Retrospective conference at the Baker Institute for Public Policy to evaluate the Accord's legacy and how its collaborative spirit can be applied today. This volume presents their views and analyses to provide guidance for a time when the world again faces the prospect of currency disequilibria, growing imbalances, trade policy reactions, and thus uncertainty for both the global economy and world politics.
Data disclosure: The data underlying the analysis in this volume are available here [zip]. The data used in chapter 14 are taken directly from William Cline's Policy Briefs 15-8 and 15-20, with the exception that they have been manipulated with a key assumption stated in the chapter.
Selected chapters and sections are provided for preview only.
C. Fred Bergsten and Russell A. Green
I Official Recollections
1. The Architect
James A. Baker, III
2. An Interview with Paul A. Volcker
Russell A. Green
3. A Personal Account of the Plaza Accord
David C. Mulford
4. Currency Policy Then and Now: The 30th Anniversary of the Plaza Accord
Charles H. Dallara
5. The Plaza Accord Viewed from Japan
II Appraisals of the Plaza
6. The Plaza Accord 30 Years Later
7. The Plaza Accord and Japan: Reflections on the 30th Anniversary
8. Why Was the Plaza Accord Unique?
Russell A. Green, David H. Papell, and Ruxandra Prodan
9. The Plaza Accord: Exchange Rates and Policy Coordination
Edwin M. Truman
10. Before the Plaza: The Exchange Rate Stabilization Attempts of 1925, 1933, 1936, and 1971
III Implications of the Plaza
11. Foreign Exchange Intervention Since the Plaza Accord: The Need for Global Currency Rules
Joseph E. Gagnon
12. A Rules-Based Cooperatively Managed International Monetary System for the Future
John B. Taylor
13. The International Monetary System in Perpetual Search of Stability
C. Fred Bergsten
About the Contributors