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2. Estimates of Fundamental Equilibrium Exchange Rates, November 2014
- Author:
- William R. Cline
- Publication Date:
- 11-2014
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This semiannual review finds that most of the major international currencies, including the US dollar, euro, Japanese yen, UK pound sterling, and Chinese renminbi, remain close to their fundamental equilibrium exchange rates (FEERs). The new estimates find this result despite numerous significant exchange rate movements associated with increased volatility in international financial markets at the beginning of the fourth quarter of 2014, and despite a major reduction in the price of oil. The principal cases of exchange rate misalignment continue to be the undervalued currencies of Singapore, Taiwan, and to a lesser extent Sweden and Switzerland, and the overvalued currencies of Turkey, New Zealand, South Africa, and to a lesser extent Australia and Brazil. Even so, the medium-term current account deficit for the United States is already at the outer limit in the FEERs methodology (3 percent of GDP), and if the combination of intensified quantitative easing in Japan and the euro area with the end to quantitative easing in the United States were to cause sizable further appreciation of the dollar, an excessive US imbalance could begin to emerge.
- Topic:
- Economics, Foreign Exchange, International Trade and Finance, and Monetary Policy
- Political Geography:
- Africa, United States, Japan, Turkey, South Africa, Brazil, and New Zealand
3. The Federal Reserve Engages the World (1970–2000): An Insider's Narrative of the Transition to Managed Floating and Financial Turbulence
- Author:
- Edwin M. Truman
- Publication Date:
- 08-2014
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper traces the evolution of the Federal Reserve and its engagement with the global economy over the last three decades of the 20th century: 1970 to 2000. The paper examines the Federal Reserve's role in international economic and financial policy and analysis covering four areas: the emergence and taming of the great inflation, developments in US external accounts, foreign exchange analysis and activities, and external financial crises. It concludes that during this period the US central bank emerged to become the closest the world has to a global central bank.
- Topic:
- Economics, Foreign Exchange, and Financial Crisis
- Political Geography:
- United States