Federal Reserve Policy in an International Context

In the postcrisis period, some foreign policymakers accused the Federal Reserve of engaging in "currency wars" and inadvertently creating "financial spillovers," arguing that these were especially consequential given the dominant role of the U.S. dollar in international trade and finance. This lecture analyzes these critiques, and argues: (1) little support exists, either theoretical or empirical, for the currency wars claim; (2) the United States and its trading partners should use non monetary tools for dealing with spillovers; and (3) the benefits of the dollar standard to the United States and the world are considerably more symmetric than in the Bretton Woods era.