Published in:FRB of Cleveland Working Paper ; No. 10-07
Extent:
1 Online-Ressource (64 p)
Language:
English
DOI:
10.2139/ssrn.1657175
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 11, 2010 erstellt
Description:
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. monetary-policy initiatives, so intervention to offset or reverse those exchange-rate responses can seem a contrary policy move and can create uncertainty about the strength of the System's commitment to price stability. That the U.S. Treasury maintained primary responsibility for foreign-exchange intervention only compounded this uncertainty. In addition, many FOMC participants feared that swap drawings and warehousing could contravene the Congressional appropriations process and, therefore, potentially pose a threat to System independence, a necessary condition for monetary-policy credibility