Plaza accord

Definition

The 1985 agreement in which (at the request of the United States) France, Germany, Japan, and the United Kingdom agreed to work together to deliberately weaken the dollar's exchange rate. The objective of this strategy was to help the U.S. improve its huge trade deficit (especially against Japan) and to spur its economy to climb out of the 1980's long recession. It worked quite well in improving the economy and reducing the trade deficit (but not against Japan). However, in terms of dollar depreciation, it worked too well. The dollar depreciated fast against the major currencies - and continued to fall beyond the desired level. So the same set of nations got together again in 1987 at Paris to undo the Plaza accord through the Louvre accord in an attempt to strengthen the dollar again.

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plaza pledge