The quasi-nomination of Stephen Moore and Herman Cain to the Federal Reserve Board has resurrected the issue of the gold standard. Jim Hamilton has repeatedly — and convincingly — critiqued the idea of a return to the classical gold standard, here, here, here, and here. But here I talk about what a gold standard for the 21st century would entail.
Category Archives: exchange rates
Guest Contribution: “The Euro area: Are member countries similar enough to share the same currency?”
Today we are pleased to present a guest contribution written by Virginie Coudert (Banque de France and CEPII), Cécile Couharde (EconomiX-CNRS, University of Paris Nanterre), Carl Grekou (CEPII and EconomiX-CNRS), and Valérie Mignon (EconomiX-CNRS, University of Paris Nanterre, and CEPII). This blog post reflects the opinions of the authors and does not necessarily express the views of the institutions to which they belong.
Forward Rate Bias over a Third of a Century
Just updated/cleaned and extended the survey and forward rate data used in Chinn and Frankel (2019) (discussed in this post). Here are preliminary results regard forward rate bias, both pre- and post-crisis.
When the Textbook Is Right: Implications of the Trump Fiscal/Trade Regime
Today we learned that through March, the Federal budget deficit was 15% larger than the corresponding point in the last fiscal year — as expected given a not particularly stimulative tax cut (so much for tax cuts paying for themselves, as Stephen Moore claimed) and the ending of spending restraints. The dollar remains at elevated levels, as interest rates have risen. The trade deficit, excluding petroleum, continues to deteriorate. As I explained to my macro class today… it’s all textbook (notes).
What Would It Take to Implement Cain’s Gold Standard, Interest-Rate-Wise?
Stabilizing the price of gold in US dollars requires adjusting the interest rate (akin to how the exchange rate is managed). Herman Cain’s call for a return to the gold standard would imply that the Fed funds rate would have to be about 15 percentage points higher than it was in January 2000 in order to keep the dollar’s value stable at January 2000 levels — a rate 18 percentage points higher than actually recorded in March 2019.
The Fault Is … in Ourselves
Or more correctly, in Mr. Trump. As reported by Bloomberg, Mr. Trump has said:
“a gentleman that likes raising interest rates in the Fed, we have a gentleman that loves quantitative tightening in the Fed, we have a gentleman that likes a very strong dollar in the Fed.”
The VSD (“Very Stable Dollar”)
Is this what we want the Chinese to peg against?
Continue readingA Primer on Exchange Rate Misalignment (Updated)
As the administration pushes for “stability” in the Chinese exchange rate while imposing tariffs on China, it might be useful to recount the various ways in which different observers define currency “misalignment”. Here I update a primer first posted in 2010.
Continue reading“International Spillovers of Monetary Policy: Conventional Policy vs. Quantitative Easing”
That’s the title of a fascinating new paper with important policy implications.
Continue reading“A Third of a Century of Currency Expectations Data: The Carry Trade and the Risk Premium”
That’s the title of a new paper, coauthored with Jeffrey Frankel, using data extending back to August 1986.
Continue reading