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Does the Federal Reserve Care about the Rest of the World?

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  • Barry Eichengreen

Abstract

Many economists are accustomed to thinking about Federal Reserve policy in terms of the institution's "dual mandate," which refers to price stability and high employment, and in which the exchange rate and other international variables matter only insofar as they influence inflation and the output gap -- which is to say, not very much. In fact, this conventional view is heavily shaped by the distinctive and peculiar circumstances of the last three decades, when the influence of international considerations on Fed policy has been limited. In fact, the Federal Reserve paid significant attention to international considerations in its first two decades, followed by relative inattention to such factors in the two-plus decades that followed, then back to renewed attention to international aspects of monetary policy in the 1960s, before the recent period of benign neglect of the international dimension. I argue that in the next few decades, international aspects are likely to play a larger role in Federal Reserve policy making than at present.

Suggested Citation

  • Barry Eichengreen, 2013. "Does the Federal Reserve Care about the Rest of the World?," Journal of Economic Perspectives, American Economic Association, vol. 27(4), pages 87-104, Fall.
  • Handle: RePEc:aea:jecper:v:27:y:2013:i:4:p:87-104
    Note: DOI: 10.1257/jep.27.4.87
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    Cited by:

    1. Edwin M. Truman, 2014. "The Federal Reserve engages the world (1970-2000): an insider's narrative of the transition to managed floating and financial turbulence," Globalization Institute Working Papers 210, Federal Reserve Bank of Dallas.
    2. Barry Eichengreen, 2014. "Doctrinal determinants, domestic and international of Federal Reserve policy, 1914-1933," Globalization Institute Working Papers 195, Federal Reserve Bank of Dallas.
    3. Stanley Fischer, 2014. "The Federal Reserve and the Global Economy : a speech at the Per Jacobsson Foundation Lecture, 2014 Annual Meetings of the International Monetary Fund and the World Bank Group, Washington, D.C., Octob," Speech 820, Board of Governors of the Federal Reserve System (U.S.).
    4. Samuel Howorth & Domenico Lombardi & Pierre L. Siklos, 2019. "Together or Apart? Monetary Policy Divergences in the G4," Open Economies Review, Springer, vol. 30(2), pages 191-217, April.
    5. Maurice Obstfeld, 2020. "Global Dimensions of U.S. Monetary Policy," International Journal of Central Banking, International Journal of Central Banking, vol. 16(1), pages 73-132, February.
    6. Michael D. Bordo & Owen F. Humpage, 2014. "Federal Reserve policy and Bretton Woods," Globalization Institute Working Papers 206, Federal Reserve Bank of Dallas.
    7. Jerome H. Powell, 2013. "Advanced economy monetary policy and emerging market economies," Proceedings, Federal Reserve Bank of San Francisco, issue Nov, pages 1-17.
    8. Mehmet ORHAN & Halil İbrahim ÇELİKEL, 2014. "The Spillover Effects of Fed’s Policies with Emphasis to the Fragile Five," Journal of Economics and Behavioral Studies, AMH International, vol. 6(12), pages 1011-1020.

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    More about this item

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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