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Is Germany a currency manipulator?

Merler, Sylvia, (2017), “Is Germany a currency manipulator?”, Bruegel, 6 February

Paul Krugman argues that Navarro is right and wrong at the same time. Germany in effect has an undervalued currency relative to what it would have without the euro, against its neighbors. This is the result of a large real depreciation during the euro’s good years, which has only been partly reversed, because wages are downward sticky, and Germany has refused to support the kind of monetary and fiscal stimulus that would raise overall euro area inflation, which remains stuck at far too low a level. But this does does not necessarily mean that the euro as a whole is undervalued against the dollar. The euro is weak, but there’s no clear relationship between the problems of Germany’s role within the euro and questions about the relationship between the euro and other currencies.

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