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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. This conventional view is heavily shaped by the distinctive circumstances of the last three decades, when the influence of international considerations on Fed policy has been limited. I discuss how 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. This longer perspective is a reminder that just because the Fed has not attached priority to international aspects of monetary policy in the recent past is no guarantee that it will not do so in the future.

Suggested Citation

  • Barry Eichengreen, 2013. "Does the Federal Reserve Care About the Rest of the World?," NBER Working Papers 19405, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19405
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    Cited by:

    1. Eichengreen, Barry, 2014. "Doctrinal determinants, domestic and international of Federal Reserve policy, 1914-1933," Globalization and Monetary Policy Institute Working Paper 195, Federal Reserve Bank of Dallas.
    2. Powell, Jerome H., 2013. "Advanced economy monetary policy and emerging market economies," Proceedings, Federal Reserve Bank of San Francisco, issue Nov, pages 1-17.
    3. Michael D. Bordo & Owen F. Humpage, 2014. "Federal Reserve Policy and Bretton Woods," NBER Working Papers 20656, National Bureau of Economic Research, Inc.
    4. Truman, Edwin M., 2014. "The Federal Reserve engages the world (1970-2000): an insider's narrative of the transition to managed floating and financial turbulence," Globalization and Monetary Policy Institute Working Paper 210, Federal Reserve Bank of Dallas.
    5. Fischer, Stanley, 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.).

    More about this item

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations

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