Jeffry Frieden: “The Politics of Exchange Rates” (podcast)

Podcast on EconoFact.

The recent strength of the dollar highlights the impact exchange rate movements can have. In addition to economic impacts, these include far-reaching social and political effects too. Jeffry Frieden, a leading scholar on the political economy of exchange rates joins EconoFact Chats to discuss who gains and who loses from swings in exchange rates, their political implications, how political considerations affect the choice of whether to allow a currency to be determined by market forces or government policies and, in particular, how this applies to the adoption and maintenance of the Euro.

Jeff is Professor of Government at Harvard University. His research focuses on the politics of international economic relations.

See also Jeffry Frieden‘s posts on Econbrowser, on Euro area crisis aftermath, the Euro project, currency politics and debt politics , and Europe’s Lehman moment.


31 thoughts on “Jeffry Frieden: “The Politics of Exchange Rates” (podcast)

  1. Barkley Rosser

    An irony of exchange rate movements is a certain asymmetry to them. Few seem to like them or gain from them.

    Exporters and import competers like devaluations, and some times they are politically important. But devaluations “look bad,” and in an inflationary world as we are in now, the rising cost of living dominates, not to mention pressure to tighten monetary policy, which pushes towards recession and offsets the gains to exporters and import competers.

    And in nations with rising currency values, well, all the opposite, but while one might think political leaders might thump their chests about showing “strength,” they never do. Just look at the Biden admin right now. Is anybody praising them for the strong dollar? No. But in many other nations political leaders are in trouble because of their weakening currencies.

    1. ltr

      April 4, 1995

      U.S. Intervenes To Back Dollar, But Move Fails

      WASHINGTON — The Clinton Administration ended more than a month of currency inaction and sought to defend the battered dollar today by pouring some $1 billion into markets in Asia and the United States. But it failed to stem an assault on the currency by speculators around the globe.

      The support for the dollar was matched by public statements that seemed intended to dispel perceptions that Washington had no intention of taking drastic action to rein in the large trade and budget deficits that contribute to the dollar’s weakness.

      “This Administration believes a strong dollar is in America’s interest,” Treasury Secretary Robert E. Rubin said, “and we remain committed to strengthening the fundamentals that are ultimately important to maintaining a strong and stable currency.” …

      January 15, 2018

      Nominal and Real Broad Effective Exchange Rate for United States, 1994-2022

      (Indexed to 1994)

      1. pgl

        I remember these discussions back then. This claim that the Clinton Administration was trying to appreciate the dollar artificially in spite of the high trade deficits was either bad reporting or total political dishonesty. We had a floating exchange rate back then – not some managed float.

      2. pgl

        “This Administration believes a strong dollar is in America’s interest,” Treasury Secretary Robert E. Rubin said, “and we remain committed to strengthening the fundamentals that are ultimately important to maintaining a strong and stable currency.”

        When Rubin said this – I suspect he had lost his marbles. After all ” strengthening the fundamentals” would equate to begging the FED raise interest rates. But at the time, the White House was furious that the FED had pursued tight money. Rubin is a bright guy and what led to this weird statement was beyond me.

    1. baffling

      many local HEB grocery stores (most popular in texas) have Tesla superchargers in the parking lot. as do many of the Whole Foods stores. if electric vehicles are becoming common in texas, you know we are moving towards an electric world without ICE. and these TVs are increasingly being powered by renewable solar and wind farms in texas.

    2. Anonymous

      i did not read the article.

      i control f’ed “volt” got zero hits

      i control f’ed “480” and “440” got zero hits.

      the gas station/7-11 rapid charger draws 440/480 volts!! 45 minutes for 80% charge

      the rapid home charger draws 220 volts! 8 hours for 80%. you have to sleep on that…..

      both are a drag on the “grid” and the 7-11 likely has 220 like the housing around it.

      the computer nav on the ev has charger locations….

      i could think of very few places i’d want to hang out for 45 minutes on a road trip!

      1. baffling

        you should read the article.
        what it indicates is that we still need reform on the utility business to make this work. right now the rules are set up (probably intentionally) to impede better access to high draws of power. this can and should be addressed. it is a policy issue, not a technology issue.
        i agree that 45 minutes is too long at a convenience store. but i also know that if you fill up with gas and go inside to pick something up, that can easily set you back 20 minutes at a busy store. that is over half a “tank” of power (it does not charge linearly in time).
        as i noted previously, i see more charging stations at grocery stores. it is not unusual to spend up to an hour in such a store. that is very useful charging time.
        the more ubiquitous charging stations become, the less of an issue the charging time becomes. you simply charge at multiple locations as needed. your minimum requirement is simply to acquire enough charge to get to your next destination and home. you don’t always need to top it off while on the road.

        1. Anonymous

          pricing policy, added investment and subsidizing…. price controls?

          all ev’s should be powered by solar and wind! on their own grid! with huge batteries for back up!

          1. baffling

            “pricing policy, added investment and subsidizing”
            in most of America, electricity production and distribution is a state approved monopoly. so you advocate we keep that model forever, even if an alternative appears? a stunning display of lack of foresight.

  2. ltr

    October 18, 2022

    The Fed, Staring Down Two Big Choices, Charts an Aggressive Path
    Federal Reserve officials are barreling toward another three-quarter point increase in November, and they may decide to do more as inflation refuses to budge.
    By Jeanna Smialek

    Federal Reserve officials have coalesced around a plan to raise interest rates by three quarters of a point next month as policymakers grow alarmed by the staying power of rapid price increases — and increasingly worried that inflation is now feeding on itself.

    Such concerns could also prompt the Fed to raise rates at least slightly higher next year than previously forecast as officials face two huge choices at their coming meetings: when to slow rapid rate increases and when to stop them altogether.

    Central bankers had expected to debate slowing down at their November meeting, but a rash of recent data suggesting that the labor market is still strong and that inflation is unrelenting has them poised to delay serious discussion of a smaller move for at least a month. The conversation about whether to scale back is now more likely to happen in December. Investors have entirely priced in a fourth consecutive three-quarter point move at the Fed’s Nov. 1-2 meeting, and officials have made no effort to change that expectation.

    Officials may also feel the need to push rates higher than they had expected as recently as September, as inflation remains stubborn even in the face of substantial moves to try to wrestle it under control. While the central bank had penciled in a peak rate of 4.6 next year, that could nudge up depending on incoming data. Rates are now set around 3.1 percent, and the Fed’s next forecast will be released in December….

    1. Macroduck

      “…could also prompt…”
      “…has them poised…”
      “…is now more likely to happen…”
      “…may also feel the need…”
      “…could nudge up…”

      This is terrble stuff, packed with weasel words. The few facts the author presents are swept past readers’ eyes in a flood of speculative hooey.

      She may not be wrong, but so what? The same information can be had in a hundred oher places without the drivel.


      Refuses to budge???? It only grew 1.9% in the 3rd quarter. This is a lazy article by a poor journalist.

  3. ltr

    Jeffry Frieden: “The Politics of Exchange Rates”

    [ Really nice.

    From Chile to Ghana, currency value declines have been sharp and along with increasing prices, such as for fertilizer materials in particular, could be significantly economically damaging. The IMF and World Bank have been lax in intervening to assist developing countries, and I find this distressing. ]

  4. Macroduck

    Off topic, NOPEC –

    Grassley and Schumer are both beating the drum for S 977, the No Oil Producing and Exporting Cartels Act. Biden entertained the idea of similar legislation when in the Senate and probably won’t want to shoot ye hotion down now. Saudi Arabia’s bad timing makes this a bandwagon that politicians may have to jump on, at least until after the votes are counted. Morning Consult/Politico found that 45% of poll respondents support NOPEC. It may not be a coincidence that Grassley is all over NOPEC while this young Franken guy (no, not the funny one) is nipping at his heels.

    Legislation would probably have to wait until a new congress is seated, unless Grassley suceeds in attaching it to the Defense Authorization Act. Wating till next year might mean nothing happens; the NOPEC idea has been around since Biden was a Senator.

    1. pgl

      Exactly what does NOPEC do? I’m all in favor of breaking up cartels but this one is a world cartel.

    2. Anonymous

      biden [mistake] drawing down the strategic petrol reserve (spr) to [appear to] lower gasoline prices, resulting in record export of product and stable gasoline inventory with declining [to decades low] distillation inventory….. that is market manipulation w/ unintended consequences.

      when opec+ does it for spr manipulated markets and expectation of economic slow down it is wrong!

      i see the pentagon is not the only puzzle palace in dc.

      schumer might want to worry distillate inventory and price arriving in ny harbor the next four months!.

      1. Barkley Rosser


        Oh gag, you competing with CoRev again for the Most Stupid Commenter on Econbrowser.

        Is Biden drawing down the SPR right now because he is thinking about what the price might be in four months? No. He is right now focused on the next three weeks or so up to the midterm elections, and he is trying to offset the short term effect on gasoline prices by that time of the production cut that OPEC+ gave him led by MbS.

        I think you actually know, this, which makes this last comment by you just look completely silly.

        BTW, it may well be that this current drawdown will have zero effect on the price of gasoline in the US between now and the midterms, but he wants it to be seen that he is trying to keep those prices down. Duuuuuuuuuuuh.

  5. Macroduck

    Off topic, China’s role in cabon emissions –

    Readers of comments here have to wade through fatuous “China good” spam of all sorts. Aside from lies about human rights, the propaganda that annoys me the most is ltr’s “look how great China is on carbon emissions” dreck. It’s axiomatic – the more ltr scribbles about a subject, the worse China’s actual behavior is.

    Well, thank the jeebus for Noah Smith:

    China produces more carbon emissions than any other country. And that is not because the rest of us outsource polluting to China. China’s carbon pollution is mstly its own. (China’s concrete-heavy growth levers are an abomination.) Elsewhere, Smith posts a carbon emissions map showing that China not only emits more carbon than the U.S., but more than all the Americas combined. Plus parts of Africa. (I should probably check his math.)

    So the next time ltr posts a rainbows and unicorns story about China’s wonderful tree planting, just remember, China is now by far the biggest source of carbon emissions in the world. No contest. The U.S. must radically reduce its greenhouse gas emissions, but China needs to do even more.

    1. baffling

      i treat this in the same category as non-compete agreements. they should not be permitted. this type of behavior amounts to economic coercion that takes away an employees freedom to find better employment. a company invests in a worker and training because it has the ability to improve the bottom line of the firm. if the firm treats workers fairly, they will not leave after the training. you only leave if somebody treats you better or the pay is higher.
      the same applies to noncompete agreements. once you move below the executives of a firm, these should not exist. somebody’s skills and education should not be held hostage by a firm through non-competes.

    2. pgl

      PetSmart is being sued over this practice!

      July 28, 2022 | San Mateo, CA — Today, BreAnn Scally, a former PetSmart pet groomer filed a groundbreaking class action lawsuit against the retail pet supply giant, alleging that the firm is engaged in a scheme to trap trainee pet groomers in their low-wage jobs by levying thousands of dollars in abusive and unenforceable debts against them. These illegal debts arise from Training Repayment Agreement Provisions (TRAPs)—contracts that put workers on the hook to repay employers for costs associated with worker training or education. Although these predatory contract terms have existed for decades, TRAPs have become more common across the economy, as companies look for new ways to undermine worker bargaining power. Ms. Scally is represented by Towards Justice and Jubilee Legal, with support from the Student Borrower Protection Center (SBPC).

      Today’s lawsuit alleges that PetSmart uses a TRAP to limit groomers from seeking out better working conditions, locking low-wage workers for years into high-volume groomer jobs that can be grueling and dangerous. For groomers who quit within two years of training, PetSmart may use debt collectors to pursue them for training debts that can total more than $5,000.

      The complaint alleges that, whether PetSmart’s TRAPs are analyzed under employment or consumer law, they are illegal. If the training PetSmart provides its employees is primarily job training for PetSmart’s own benefit, then employment law prevents that cost from being passed off on workers. And if the training provides groomers with transferable skills for personal use, then PetSmart is operating an unapproved for-profit college illegally in California, and seeking to collect on an unlawful and unenforceable debt. Either way, the effect is that workers may be trapped in their jobs against their will, unable to exercise their fundamental right to control who they work for.

      A copy of the complaint in Scally v. PetSmart, filed today in California Superior Court, is available here.

  6. Macroduck

    Off topic, Larry is at it again –

    Y’all have seen Larry Summer’s assessment that inflation is the result of “quiet quitting”? Productivity fell in Q2 because workers are insufficiently beaten down?

    I have a couple of questions. First, does Larry have the labor composition index for 2022? ‘Cause I don’t, and neither does BLS. The reason I ask is, labor composition in most years makes a small contribution to productivity, but lately it has gone wobbly. From 1988 to 2019, the annual contribution ran from 0.1% to 0.6%. Then, in 2020, composition added 0.9% to productivity, ’cause all the waiters and retail clerks lost their jobs. In 2021, they went back to work and composition added nothing – first goose egg in 33 years:

    So labor composition strikes me as a possible culprit in the drop in productivity so far in 2022. (And remember, productivity didn’t drop nearly as much if you measure in GDI terms rather than GDP terms, but we don’t.)

    We do know a few things, though, about composition. For instance, we know than prime age workers (25-54) lost fewer jobs to Covid, and regained fewer jobs in the recovery, than the youngs and the olds did:

    Youngs and olds are considered “non-prime” for a reason. They piled back in to jobs. Glad to have ’em, but they are a drag on productivity growth.

    We also know that service employment has been rising faster in the recovery from the Covid recession, relative to goods employment, than before the recession:

    Service jobs are, on average, less productive than goods-producing jobs.

    Seems to me like those two facts might mean labor composition is not making much contribution to productivity so far in 2022. I must be wrong, though, ’cause Larry says it’s “quiet quitting” that’s the problem and it has to stop.

    I mentioned that I have a couple of questions, and here’s the other: don’t we have some way of measuring how engaged workers are in their jobs? Otherwise, we are stuck with anecdotal evidence of worker attitudes, and nobody wants that. As it happens, Gallup does a worker engagement survey every year. We don’t have 2022 data yet. The data we have do show a slight drop in worker engagement in 2021 from a record high level of engagement in 2020. In fact, engagement in 2019, 2020 and 2021 was the highest in the 22-year history of the survey:

    Larry thinks we need a “significant” recession – his word – to focus workers’ attention because they haven’t set new records? Or maybe we need a significant recession to address a composition issue? Homelessness must surely improve productivity.

    It is sometimes suggested that Summers is A) a bitter old man who B) resents being passed over for the Fed chairmanship. Seems like A) Yep! and B) We should thank our stars.

    1. baffling

      we have some commenters here who seem to be bitter over failing to achieve their professional goals as well. they have a similar behavior regarding the desire to punish others in response. human nature I guess?

      1. Moses Herzog

        I’m not so certain. I’m thinking of some PhD commenters here who go out of their way to be acerbic. Some people just have black souls.

        I can’t honestly say I’ve achieved all my life goals, educational/career/personal etc. And I take an occasional shot at this blog’s “usual suspects”. But for the most part, I don’t see the point. Do you remember fictional character Ernest P. Worrell in the old Braum’s Ice Cream TV commercials and “Ernest Goes To…… ” films?? At what point does a PhD stalking “Ernest” (Peaktrader, CoRev, Ed Hanson etc) and telling Earnest he’s “wrong about point X” 10,000 times become irrelevant to improving the dialogue?? There’s nothing admirable about shooting fish in a barrel.

        1. Barkley Rosser


          Yeah, “black souls” like John Coltrane or Martin Luther King, Jr. Yeah, I know, that was not what you meant.

          As it is, I continue to suspect that if you and I were to actually meet, we would get along just fine, although I suspect this will never happen.

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