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Risk Aversion, Global Asset Prices, and Fed Tightening Signals
The global sell-off last May of emerging market equities and currencies of countries with high interest rates (“carry-trade” currencies) has been attributed to changes in the outlook for U.S. monetary policy, since the sell-off took place immediately following Chairman Bernanke’s May 22 comments concerning the future of the Fed’s asset purchase programs. In this post, we look back at global asset market developments over the past summer, and measure how changes in global risk aversion affected the values of carry-trade currencies and emerging market equities between May and September ...
Is Dollar Dominance in Doubt?
The dollar has been the global currency of choice for nearly a century, but in light of recent U.S.-led financial sanctions, some wonder whether that status will endure.
Are There Compelling Reasons to Consider a Central Bank Digital Currency for the U.S.?
This article examines alternative arguments for considering a central bank digital currency (CBDC) for the U.S. It points out that introducing a CBDC is unlikely to substantially improve the current U.S. money and payments system. A more compelling reason to consider a CBDC is to prepare the U.S. system against future threats, especially those associated with the rise of private and foreign digital currencies. Therefore, there appears no immediate need for the U.S. to issue a CBDC, but the U.S. needs to explore the CBDC technology now for potential future use.