Dollar and Yen analyzes the friction between the UnitedStates and Japan from the viewpoint of exchange rateeconomics.

"This book boldly challenges some of the basic assumptions andpresumptions of international economics, such as the tradebalance-exchange rate relationship, and the endogeneity of exchangerate with respect to other macro variables. These views shouldgenerate some serious debates about our basic theories and policyframeworks. The topics will be of great interest to policy makersand academic economists alike." Shang-Jin Wei, Associate Professor of Public Policy,Kennedy School of Government, Harvard University

Introduction - the syndrome of the ever-higher Yen; policy causes and postwar origins of Japan-US economic conflict - differential productivity growth and the saving shortage in the United States; exchange-rate fluctuations and their consequences - price diffusion and "Endaka Fukyo"; balancing international competitiveness in the longer run - wage adjustment versus Yen appreciation; the transfer problem and macroeconomic fluctuations - "Endaka Fukyo", bubbles and credit crunches; the exchange rate and the trade balance in theory - insular versus open economics; the exchange rate and the Japan-US trade balance in practice - a critique of the modern elasticities approach; monetary and exchange-rate regimes, inflation persistence, and the volatility of long-term interest rates; price deflation and purchasing power parity - a causality analysis of Yen appreciation and Japanese monetary policy; overcoming the syndrome - toward a US-Japan commercial compact and monetary accord; is the syndrome over? the fall of the Yen 1995-96, and its implications for the transition.