Search Results
Working Paper
On the evolution of U.S. foreign-exchange-market intervention: thesis, theory, and institutions
Attitudes about foreign-exchange-market intervention in the United States evolved in tandem with views about monetary policy as policy makers grappled with the perennial problem of having more economic objectives than independent instruments with which to achieve them. This paper?the introductory chapter to our history of U.S. foreign exchange market intervention?explains this thesis and summarizes our conclusion: The Federal Reserve abandoned frequent foreign-exchange-market intervention because, rather than providing a solution to the instruments-versus-objectives problem, it interfered ...
Journal Article
Monetary economic research at the St. Louis Fed during Ted Balbach's tenure as research director
Ted Balbach served as research director at the Federal Reserve Bank of St. Louis from 1975 to 1992. This paper lauds his contributions during that time, including the expanded influence of the Review, enhanced databases and data publications, and a visiting scholar program that attracted leading economists from around the world. Balbach is remembered fondly as a visionary leader and gracious mentor.
Journal Article
Schwartz on Friedman
Working Paper
Bretton Woods and the U.S. decision to intervene in the foreign-exchange market, 1957-1962
The deterioration in the U.S. balance of payments after 1957 and an accelerating loss of gold reserves prompted U.S. monetary authorities to undertake foreign-exchange-market interventions beginning in 1961. We discuss the events leading up to these interventions, the institutional arrangements developed for that purpose, and the controversies that ensued. Although these interventions forestalled a loss of U.S. gold reserves, in the end, they only delayed more fundamental adjustments and, in that respect, were a failure.
Conference Paper
The effects of regulation on systemic risks
Working Paper
The Evolution of the Federal Reserve Swap Lines since 1962
In this paper, we describe the evolution of the Federal Reserve?s swap lines from their inception in 1962 as a mechanism to forestall claims on US gold reserves under Bretton Woods to their use during the Great Recession as a means of extending emergency dollar liquidity. We describe the Federal Reserve?s successes and failures. We argue that swaps calm crisis situations by both supplementing foreign countries? dollar reserves and by signaling central-bank cooperation. We show how swaps exposed the Federal Reserve to conditionality and raised fears that they bypassed the Congressional ...
Working Paper
U.S. foreign-exchange-market intervention during the Volcker-Greenspan era
The Federal Reserve abandoned foreign-exchange-market intervention because it conflicted with the System?s commitment to price stability. By the early 1980s, economists generally concluded that, absent a portfolio-balance channel, sterilized foreign-exchange-market intervention did not provide central banks with a mechanism for systematically influencing exchange rates independent of their monetary policies. If intervention were to have anything other than a fleeting, hit-or-miss effect on exchange rates, monetary policy had to support it. Exchange rates, however, often responded to U.S. ...
Working Paper
U.S. intervention and the early dollar float: 1973-1981
The dollar?s depreciation during the early floating rate period, 1973?1981, was a symptom of the Great Inflation. In that environment, sterilized foreign exchange interventions were ineffective in halting the dollar?s decline, but they showed a limited ability to smooth dollar movements. Only after the Volcker FOMC changed its monetary-policy approach and demonstrated a willingness to maintain a disinflationary stance despite severe economic weakness and high unemployment did the dollar begin a sustained appreciation. Also contributing to the ineffectiveness of the interventions was the ...
Working Paper
A brief empirical history of U.S. foreign-exchange intervention: 1973-1995
This paper assesses U.S. foreign-exchange intervention since the inception of generalized floating. We find that intervention was by and large ineffectual. We first identify which interventions were successful according to three criteria. Then, we test whether the number of observed successes significantly exceeds the amount that would randomly occur given the near-martingale nature of daily exchange-rate changes. Finally, we investigate whether the various characteristics of an intervention - its size, frequency, or coordination - can increase the probability of success. We find that ...