Formula to Determine the Countries Equilibrium Exchange Rate With the Dollar and Proposal for a Second Bretton Woods Conference

TL;DR

This paper develops a formula to determine equilibrium exchange rates that balance trade among countries and proposes a hemispheric economic alliance to promote stability and growth in international trade.

Contribution

It introduces a mathematical formula for equilibrium exchange rates and advocates for a common American hemisphere market to enhance trade stability.

Findings

Proposed a formula to set countries' exchange rates for trade balance

Suggested organizing a common market for the American hemisphere

Addressed trade deficit and surplus issues affecting global growth

Abstract

This paper presents the way in which can be determined the exchange rates that simultaneously balance the trade balances of all countries that trade with each other within a common market. A mathematical synthesis between the theory of comparative advantages of Ricardo and Mill and the New Theory on International Trade of Paul Krugman is also presented in this paper. This mathematical synthesis shows that these theories are complementary. Also presented in this paper is a proposal to organize a common market of the American hemisphere. This economic alliance would allow to establish a political alliance for the common defense of the entire American hemisphere. The formula we developed in this paper to determine the exchange rates of the countries solves the problem that Mexico, Canada, Europe, Japan and China currently experience with the United States in relation to the deficits and surpluses in the trade balance of the countries and their consequent impediment so that stable growth of international trade can be achieved.