<p>I'm trying to understand what caused this <strong>long period of range boundedness for the USD index</strong> from <strong>1987-1995</strong> from an economic standpoint.</p>
<p><a href="https://i.sstatic.net/TdXga.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/TdXga.png" alt="enter image description here" /></a></p>
<p>From my understanding. In 1985 the USD had reached it's <strong>highest value it had ever been</strong>, alongside with a <strong>heavy trade deficit</strong> due to the increasing value of the dollar. This caused the <strong>Plaza accord</strong> to be brought into play in 1985, which helped the USD in making its exports more competitive. In 1987, the <strong>Louvres Accord</strong> was brought into play to prevent the USD from depreciating too much. From there on USD stayed range bound despite a gradual increase in the Stock Market.</p>
<p>Was this due to the Central Bank trying to keep the USD within a competitive range so that US exports could continue being competitive and thus continue tackling its trade deficit? Was nothing really exciting happening in the US economy at the time (like the tech bubble that would follow this period causing immense growth in both the stock market and USD index) so the economy would just fluctuate up and down. Was it because of the stock market crash of 1987 where investors diverted money away from the US economy for close to 10 years?</p>

CC BY-SA 4.0
2023-08-06T22:17:51.250Z
I don't understand your question. What in that chart makes 2008 - 2014 different from the period you chose? Also, I presume you look at the dollar index? Are you familiar with the [basic FX](https://quant.stackexchange.com/a/67940/54838) theories?
AKdemy
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2023-08-10T06:53:37.060Z
I disagree with the premise. Prove that it was range bound more so than other periods. Voting to close.
H2ONaCl
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2023-08-17T15:21:41.203Z
@AKdemy apologies for the late response. I'm not denying that 2008-2014 isn't the same in terms of being rangebound as the period I'm asking about. I was just wondering what specifically would have caused 1987-1995 to be rangebound (I know it's not 1 factor but a myriad of factors). I am familiar with the basic FX theories.
Man Dem
CC BY-SA 4.0
2023-08-17T15:24:54.743Z
@H2ONaCl Looking at 1995-2008 it is obvious that this period consists of only 2 trends(up and down with some choppiness in between but the overall direction is undoubtedly either up or down). Same from 1985 to 1987. The only other period that seems rangebound is 2008-2014. But I just wanted to see what economic factors were resulting for the range boundedness in 1987-1995. I wasn't denying that other periods can't be range bounded.
Man Dem
CC BY-SA 4.0
2023-08-24T15:45:01.293Z
@ManDem saying something is obvious does not cut it.
H2ONaCl
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2023-08-29T20:17:05.670Z
@H2ONaCl don't know what else you want me to say. Seems like you're pretty adamant about your position and nothing will change your mind.
Man Dem
CC BY-SA 4.0
2023-08-31T16:42:46.107Z
@ManDem You would potentially change my mind if your determination seems to be the output of an algorithm. I would examine the assumptions and see if your algo gives the result you claim.
H2ONaCl
<macroeconomics><monetary-policy><economic-growth><international-trade><exchange-rates>
Why was the USD rangebound between 1987 and 1995 from an economic standpoint?
Man Dem
# Why was the USD rangebound between 1987 and 1995 from an economic standpoint?

(Asked by: username_0 on 2023-08-06)

I'm trying to understand what caused this **long period of range boundedness for the USD index** from **1987-1995** from an economic standpoint.

[![enter image description here](https://i.sstatic.net/TdXga.png)](https://i.sstatic.net/TdXga.png)

From my understanding. In 1985 the USD had reached it's **highest value it had ever been**, alongside with a **heavy trade deficit** due to the increasing value of the dollar. This caused the **Plaza accord** to be brought into play in 1985, which helped the USD in making its exports more competitive. In 1987, the **Louvres Accord** was brought into play to prevent the USD from depreciating too much. From there on USD stayed range bound despite a gradual increase in the Stock Market.

Was this due to the Central Bank trying to keep the USD within a competitive range so that US exports could continue being competitive and thus continue tackling its trade deficit? Was nothing really exciting happening in the US economy at the time (like the tech bubble that would follow this period causing immense growth in both the stock market and USD index) so the economy would just fluctuate up and down. Was it because of the stock market crash of 1987 where investors diverted money away from the US economy for close to 10 years?

**Tags:** macroeconomics, monetary-policy, economic-growth, international-trade, exchange-rates

> **Comments:**
> **username_1**: I don't understand your question. What in that chart makes 2008 - 2014 different from the period you chose? Also, I presume you look at the dollar index? Are you familiar with the [basic FX](https://quant.stackexchange.com/a/67940/54838) theories?  
> **username_2**: I disagree with the premise. Prove that it was range bound more so than other periods. Voting to close.  
> **username_0**: @username_1 apologies for the late response. I'm not denying that 2008-2014 isn't the same in terms of being rangebound as the period I'm asking about. I was just wondering what specifically would have caused 1987-1995 to be rangebound (I know it's not 1 factor but a myriad of factors). I am familiar with the basic FX theories.  
> **username_0**: @username_2 Looking at 1995-2008 it is obvious that this period consists of only 2 trends(up and down with some choppiness in between but the overall direction is undoubtedly either up or down). Same from 1985 to 1987. The only other period that seems rangebound is 2008-2014. But I just wanted to see what economic factors were resulting for the range boundedness in 1987-1995. I wasn't denying that other periods can't be range bounded.  
> **username_2**: @username_0 saying something is obvious does not cut it.  
> **username_0**: @username_2 don't know what else you want me to say. Seems like you're pretty adamant about your position and nothing will change your mind.  
> **username_2**: @username_0 You would potentially change my mind if your determination seems to be the output of an algorithm. I would examine the assumptions and see if your algo gives the result you claim.  

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## 0 answers

