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Recent developments in monetary macroeconomics and U.S. dollar policy


  • William T. Gavin


This paper summarizes recent developments in the theory and practice of monetary policy in a closed economy and explains what these developments mean for United States dollar policy. There is no conflict between what is appropriate U.S. monetary policy at home or abroad because the dollar is the world's key currency. Both at home and abroad, the main problem for U.S. policymakers is to provide an anchor for the dollar. Recent experience in other countries suggests that a solution is evolving in the use of inflation targets.

Suggested Citation

  • William T. Gavin, 2005. "Recent developments in monetary macroeconomics and U.S. dollar policy," Working Papers 2005-062, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2005-062

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    References listed on IDEAS

    1. Timothy Cogley & Thomas J. Sargent, 2005. "Drift and Volatilities: Monetary Policies and Outcomes in the Post WWII U.S," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(2), pages 262-302, April.
    2. Corsetti, Giancarlo & Pesenti, Paolo, 2005. "International dimensions of optimal monetary policy," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 281-305, March.
    3. Mervyn A. King, 1999. "Challenges for monetary policy : new and old," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 11-57.
    4. Faust, Jon & Swanson, Eric T. & Wright, Jonathan H., 2004. "Identifying VARS based on high frequency futures data," Journal of Monetary Economics, Elsevier, vol. 51(6), pages 1107-1131, September.
    5. William T. Gavin & Benjamin D. Keen & Michael R. Pakko, 2005. "The monetary instrument matters," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 633-658.
    6. Refet S. G├╝rkaynak & Brian P. Sack & Eric T. Swanson, 2003. "The excess sensitivity of long-term interest rates: evidence and implications for macroeconomic models," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    7. William T. Gavin, 2003. "Inflation targeting: why it works and how to make it work better," Working Papers 2003-027, Federal Reserve Bank of St. Louis.
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    Dollar; American ; Monetary policy;

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