Plaza Accord 1985
The Plaza Accord was a coordinated 1985 G5 intervention to weaken the dollar after a brutal early-1980s USD squeeze — not a crash, but a regime change in FX that re-priced US manufacturing and later fed Japan’s bubble politics.
Definition
Volcker’s rates and safe-haven flows had pushed the dollar to extremes. At the Plaza Hotel the G5 agreed to sell USD. The dollar fell hard into 1987; the 1987 Louvre Accord tried to stabilize it. Japan’s post-Plaza easing is part of the bubble story.
Why it matters
It is the canonical coordinated-intervention success (for the goal they named) and a warning about second-round domestic credit.
Case
USD peaked in 1985, declined ~40% on a real effective basis into 1987. US exporters got relief; Japanese asset inflation got fuel.
How to read it
Intervention works when it agrees with the desired rate path and is backed by policy. Plaza was not a verbal-only jawbone.
Key papers
Landmark references with real publisher or arXiv links — not token-overlap noise.
- The Plaza Accord, 30 Years LaterFrankel · 2015 · NBERRetrospective on Plaza mechanics.