Owen F. Humpage |

Senior Economic Advisor


Owen F. Humpage, Senior Economic Advisor

Owen Humpage is a senior economic advisor specializing in international economics in the Research Department of the Federal Reserve Bank of Cleveland. His current research focuses on the history and effectiveness of U.S. foreign-exchange-market interventions. In addition, he has investigated the Chinese renminbi peg, quantitative easing in Japan, and the sustainability of U.S. current-account deficits.

Dr. Humpage has taught economics at Case Western Reserve University, Oberlin College, Cleveland State University, and Baldwin-Wallace College.

A native Clevelander, Dr. Humpage received a bachelor’s degree in economics from the University of Dayton, a master’s degree in economics from Miami University, and a doctorate in economics from Case Western Reserve University.

  • Fed Publications
  • Other Publications
  • Work in Progress
Title Date Publication Author(s) Type

 

2014-07 ; Economic Commentary
Abstract: The Federal Reserve System is a model of an independent central bank, with the authority to resist political pressure and act in the long-term best economic interest of the country. But this has not always been the case. In the past—and not too distant past at that—US monetary policy has frequently yielded to other governmental requirements. Even for the modern Federal Reserve, independence is a nuanced, mutable and, ultimately, fragile concept, but one that is essential to maintain.

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March, 2014 Federal Reserve Bank of Cleveland, working paper no. 14-02 ; Working Papers
Abstract: Independence is the hallmark of modern central banks, but independence is a mutable and fragile concept, because the governments to whom central banks are ultimately responsible can have objectives that take precedence over price stability. This paper traces the Federal Reserve's emergence as a modern central bank beginning with its abandonment of monetary policy for debt-management operations during the Second World War and through the controversies that led to the Treasury-Federal Reserve accord in 1951. The accord, however, did not end the Federal Reserve's search for independence. After the accord, the Federal Reserve's view of responsibilities "within" government led it to policies—even keel and foreign exchange operations—that complicated the System's ability to conduct monetary policy.

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October, 2013 Federal Reserve Bank of Cleveland, working paper no. 13-15 ; Sanchita Mukherjee; Working Papers
Abstract: Using IV-GMM techniques and real-time data, we estimate a forward looking, Taylor-type reaction function incorporating dummy variables for even-keel operations and a variable for foreign official pressures on the U.S. gold stock during the Great Inflation. We show that when the Federal Reserve undertook even-keel operations to assist U.S. Treasury security sales, the FOMC tended to delay monetary-policy adjustments and to inject small amounts of reserves into the banking system. The operations, however, did not contribute significantly to the Great Inflation, because they occurred during periods of both monetary ease and monetary tightness, at least in the FOMC's view. Consequently, the average federal funds rate during months containing even-keel events was no different than the average federal funds rate in other months, suggesting that even keel had no effect on the thrust of monetary policy. We also show that prospective gold losses had no effect on the FOMC's monetary-policy decisions in the 1960s and early 1970s.

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2013-13 ; Economic Commentary
Abstract: Since the mid-1990s, monetary authorities in most large developed countries have backed away from foreign-exchange intervention—buying and selling foreign currencies to influence exchange rates. Switzerland's recent experience goes a long way to illustrate why: Foreign-exchange intervention did not afford the Swiss National Bank with a means of systematically affecting the franc independent of Swiss monetary policy, and it left the Bank exposed to foreign-exchange losses. To affect exchange rates, central banks must change their monetary policies.

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November, 2012 Federal Reserve Bank of Cleveland, working paper no. 12-32 ; Michael D Bordo; Anna J Schwartz; Working Papers
Abstract: This paper describes the United States' first line of defense against shortcomings in the Bretton Woods system, which threatened the system's continuation as early as 1960. The exposition describes the Federal Reserve's use of swap lines both to provide cover for central banks' unwanted dollar exposures, thereby forestalling claims on the U.S. gold stock, and to supply dollar liquidity to countries facing temporary balance-of-payments deficits, thereby bolstering confidence in their parities. As suggested by the expansion and growing use of the swap lines, the operations failed to distinguish between temporary and fundamental disequilibrium forces. In substituting temporary for fundamental adjustments, the lines ultimately proved inadequate.

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2012-09 ; Economic Commentary
Abstract: Over the past couple of decades, central banks have been taking steps to increase the transparency of their monetary policies through clearer communications with the public. While there are many differences between the economic challenges Japan has been struggling with in the past decade and those facing U.S. and European central bankers now, we can learn a great deal about combating deflation from Japan’s experiences.

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March, 2012 Federal Reserve Bank of Cleveland, working paper no. 12-07 ; Michael D Bordo; Anna J Schwartz; Working Papers
Abstract: Foreign-exchange operations did not end after the United States stopped its activist approach to intervention. Japan persisted in such operations, but avoided overt conflict with its monetary policy. With the onset of the Great Recession, Switzerland has transacted in foreign exchange both for monetary and exchange-rate purposes, and key central banks have used swap facilities to extended their lender-of-last-resort functions. Developing and emerging-market economies continue to intervene, but their actions may hamper the development of their own foreign-exchange markets. China's undervalued exchange rate is producing inflation and real appreciation, despite China's efforts to sterilize its reserve accumulation.

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October, 2011 Federal Reserve Bank of Cleveland, working paper no. 11-27 ; Michael D Bordo; Anna J Schwartz; Working Papers
Abstract: The United States all but abandoned its foreign-exchange-market intervention operations in late 1995, when they proved corrosive to the credibility of the Federal Reserve?s commitment to price stability. We view this decision as the culmination of the evolution of U.S. monetary policy over the past century from a gold standard to a fiat money regime. The abandonment of intervention was necessary to secure monetary policy credibility.

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September, 2011 Federal Reserve Bank of Cleveland, working paper no. 11-18 ; Michael D Bordo; Anna J Schwartz; Working Papers
Abstract: If official interventions convey private information useful for price discovery in foreign-exchange markets, then they should have value as a forecast of near-term exchange-rate movements. Using a set of standard criteria, we show that approximately 60 percent of all U.S. foreign-exchange interventions between 1973 and 1995 were successful in this sense. This percentage, however, is no better than random. U.S. intervention sales and purchases of foreign exchange were incapable of forecasting dollar appreciations or depreciations. U.S. interventions, however, were associated with more moderate dollar movements in a manner consistent with leaning against the wind, but only about 22 percent of all U.S. interventions conformed to this pattern. We also found that the larger the size of an intervention, the greater was its probability of success, although some interventions were inefficiently large. Other potential characteristics of intervention, notably coordination and secrecy, did not seem to influence our success rates.

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June, 2011 Federal Reserve Bank of Cleveland, working paper no. 11-13 ; Michael D Bordo; Anna J Schwartz; Working Papers
Abstract: Attitudes about foreign-exchange-market intervention in the United States evolved in tandem with views about monetary policy as policy makers grappled with the perennial problem of having more economic objectives than independent instruments with which to achieve them. This paper—the introductory chapter to our history of U.S. foreign exchange market intervention—explains this thesis and summarizes our conclusion: The Federal Reserve abandoned frequent foreign-exchange-market intervention because, rather than providing a solution to the instruments-versus-objectives problem, it interfered with the Federal Reserve’s ability to credibly commit to low and stable inflation. This chapter also provides a theoretical discussion of intervention, background on U.S. institutions for conducting intervention, and a roadmap to the remainder of our book.

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May, 2011 Vol. 2, No. 2 ; John B Carlson; Forefront
Abstract: On the contrary: Low and stable inflation is an essential ingredient for growing jobs.

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2011-08 ; Economic Commentary
Abstract:

Do the rising commodity prices we have seen in recent years reflect basic supply-and-demand developments in various commodity markets, or are they the first signs of inflation? In practice, it’s not always easy to tell the difference—for the public or policymakers—but fundamentally different they are. Central banks can do nothing about relative commodity-price pressures, since central banks do not produce commodities. Likewise, commodity-price shocks do not impair the ability of central banks to control inflation in principle, but they can greatly complicate the task.


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April, 2011 Federal Reserve Bank of Cleveland, working paper no. 11-08 ; Michael D Bordo; Anna J Schwartz; Working Papers
Abstract: By the early 1960s, outstanding U.S. dollar liabilities began to exceed the U.S. gold stock, suggesting that the United States could not completely maintain its pledge to convert dollars into gold at the official price. This raised uncertainty about the Bretton Woods parity grid, and speculation seemed to grow. In response, the Federal Reserve instituted a series of swap lines to provide central banks with cover for unwanted, but temporary accumulations of dollars and to provide foreign central banks with dollar funds to finance their own interventions. The Treasury also began intervening in the market. The operations often forestalled gold losses, but in so doing, delayed the need to solve Bretton Woods’ fundamental underlying problems. In addition, the institutional arrangements forged between the Federal Reserve and the U.S. Treasury raised important questions bearing on Federal Reserve independence.

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December, 2010 Federal Reserve Bank of Cleveland working paper, no. 10-23 ; Michael D Bordo; Anna J Schwartz; Working Papers
Abstract: The dollar’s depreciation during the early floating rate period, 1973–1981, was a symptom of the Great Inflation. In that environment, sterilized foreign exchange interventions were ineffective in halting the dollar’s decline, but they showed a limited ability to smooth dollar movements. Only after the Volcker FOMC changed its monetary-policy approach and demonstrated a willingness to maintain a disinflationary stance despite severe economic weakness and high unemployment did the dollar begin a sustained appreciation. Also contributing to the ineffectiveness of the interventions was the Desk’s method of operation. The small, covert interventions, particularly prior to 1977, seemed inconsistent with an expectations channel of influence, and financing intervention with short-term borrowed funds seemed inconsistent with a portfolio-balance channel of influence. The Desk never clearly articulated an intervention transmission mechanism. The episode indicated the shortcomings of sterilized intervention and led to their cessation in April 1981.

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July, 2010 Federal Reserve Bank of Cleveland, Working Paper no. 1007 ; Michael D Bordo; Anna J Schwartz; Working Papers
Abstract: 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.

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2010-3 ; Economic Commentary
Abstract: In the years prior to our recent economic crisis, foreign savings poured into the United States. Did foreign traders who happened to acquire dollars from American trade deficits merely choose to keep these funds in dollar-denominated assets? Or, did foreigners decide to increase their savings inordinately and place those funds in dollar-denominated assets? The answer is key to the debate about the sources of liquidity that paved the way to our recent economic problems.

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A Brief Empirical History of U.S. Foreign-Exchange Intervention: 1973-1995

 

May, 2009 Federal Reserve Bank of Cleveland, Working Paper no. 09-03 ; Michael D Bordo; Anna J Schwartz; Working Papers
Abstract: This working paper has been revised. The new version is WP 11-18.

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March 2009 ; Economic Commentary
Abstract: The head of China's central bank is calling for countries to replace the U.S. dollar as an international reserve currency with something called SDRs. Created by the IMF way back in 1969 for that purpose, SDRs never caught on. While SDRs may be declared an official international reserve asset today, they are not likely to become the world's key international currency anytime soon. In the meantime, countries in China's current predicament--acquiring more dollars than they think prudent--could avoid such risks in the future by allowing their currencies to appreciate.

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August 2008 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: Recently, the U.S. Treasury announced a new, temporary insurance program for U.S. money-market mutual funds. To guarantee payment of these funds’ liabilities, the Treasury will use the assets of its Exchange Stabilization Fund. Created in the 1930s to stabilize the exchange value of the dollar, it has been tapped on occasion to supply loans to foreign countries in financial distress. This latest use of ESF assets is unlike anything the Fund has been used for before.

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June 2008 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: Almost everyone uses the word inflation to refer to any increase in prices, but it ought to be reserved for a just one kind of price increase. True inflation has a different cause—and a different cure—than the price increases of goods and services caused by constantly changing supply and demand conditions. The Federal Reserve can and should act to control inflation, but when relative-price changes are putting pressure on businesses and consumers, the Fed can do little.

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May 15, 2007 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: We recently invited four international economists to the Federal Reserve Bank of Cleveland to discuss global developments and to help us identify and understand the key international risks that these developments present for U.S. monetary policy. This Commentary develops a key macroeconomic concern that emerged from our conversations.

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December, 2006 Federal Reserve Bank of Cleveland, Working Paper no. 0618 ; Gabriele Galati; Patrick C Higgins; William R Melick; Working Papers
Abstract: A vast literature on the effects of sterilized intervention by the monetary authorities in the foreign exchange markets concludes that intervention systematically moves the spot exchange rate only if it is publicly announced, coordinated across countries, and consistent with the underlying stance of fiscal and monetary policy. Over the past fifteen years, researchers have also attempted to determine if intervention has any effects on the dispersion and directionality of market views concerning the future exchange rate. These studies usually focus on the variance around the expected future exchange rate-the second moment. In this paper we demonstrate how to use over-the-counter option prices to recover the risk-neutral probability density function (PDF) for the future exchange rate. Using the yen/dollar exchange rate as an example, we calculate measures of dispersion and directionality, such as variance and skewness, from estimated PDFs to test whether intervention by the Japanese Ministry of Finance had any impact on the higher moments of the exchange rate. We find little or no systematic effect, consistent with the findings of the literature on the spot rate as Japanese intervention during the period 1996-2004 was not publicly announced, rarely coordinated across countries and, in hindsight, probably inconsistent with the underlying stance of monetary policy.

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July, 2006 Federal Reserve Bank of Cleveland, Working Paper no. 0609 ; Michael D Bordo; Anna J Schwartz; Working Papers
Abstract: The deterioration in the U.S. balance of payments after 1957 and an accelerating loss of gold reserves prompted U.S. monetary authorities to undertake foreign-exchange-market interventions beginning in 1961. We discuss the events leading up to these interventions, the institutional arrangements developed for that purpose, and the controversies that ensued. Although these interventions forestalled a loss of U.S. gold reserves, in the end, they only delayed more fundamental adjustments and, in that respect, were a failure.

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December, 2005 Federal Reserve Bank of Cleveland, Working Paper no. 0514 ; Javiera Ragnartz; Working Papers
Abstract: Using a set of standard success criteria, we show that Riksbank foreign-exchange interventions between 1993 and 2002 lacked forecast value; that is, the observed number of successes was not significantly greater--and usually substantially smaller--than the number one would anticipate given the martingale nature of exchange-rate movements. Under some success criteria, the Riksbank exhibited negative forecast value, implying that the market could have profited by taking a position opposite that of the bank. Moreover, the likelihood of success was independent of such conditioning factors as the amount of a transaction, the time lapses between interventions, or the number of foreign currencies involved. As such, Riksbank intervention could not operate through an expectations or signaling channel.

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December 2005 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: One way to think about monetary policy is in terms of a neutral federal-funds rate, one that exerts neither inflationary nor deflationary pressures. Recent declines in worldwide investment, coupled with the growing globalization of financial markets, suggest that the neutral rate may be lower than the current stance of monetary policy and the stage of the business cycle may lead one to believe.

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September 1, 2005 Federal Reserve Bank of Cleveland, Economic Commentary ; Patrick C Higgins; Economic Commentary
Abstract: Since the early 1990s, international banks have been offering nondeliverable forward (NDF) contracts to clients who need to hedge exposures in currencies of emerging-market economies. Many also use the exchange rate on these contracts as a best guess of where the emerging-market currency is headed. The exchange rates on NDFs, however, likely embody a substantial risk premium that interferes with forecasting accuracy.

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August 15, 2005 Federal Reserve Bank of Cleveland, Economic Commentary ; Patrick C Higgins; Economic Commentary
Abstract: China’s recent devaluation and liberalization of its exchange-rate policies will, at best, have only a temporary impact on its trade competitiveness with the United States. The type of exchange-rate regime that a country adopts matters little for its long-term international competitiveness. In addition, the recent focus on China's exchange rate diverts attention from the real problem: China’s command economy.

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October 1, 2004 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: The United States has run a current account deficit for the past 20 years, and, as a consequence, foreigners now hold unprecedented financial claims on the United States. At some point, foreigners will become reluctant to hold these claims and will set into motion a series of corrective economic adjustments. This Economic Commentary describes the interaction between our current account deficits and the broader economy and explains the problem that continued deficits pose.

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February 15, 2004 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: A growing number of observers seem to believe that official foreign exchange intervention offers a useful tool for managing the dollar's descent. In particular situations, official transactions can sometimes produce temporary changes in exchange rates, but intervention does not permit countries to avoid or substantially modify trends in the movements of their exchange rates. At best, intervention is of very limited value.

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February 2004 Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 6 ; Patrick C Higgins; Policy Discussion Papers
Abstract: Brazil is walking on a fence between sustainable and unsustainable public-debt dynamics. How it treads could affect not only its own economic prosperity but that of its neighbors, emerging markets in general, and U.S. financial institutions in particular. Relatively small improvements in Brazilian economic conditions and a continuation of that country's recent fiscal improvements could push Brazil in the right direction, particularly if the dollar continues to depreciate.

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November, 2003 Federal Reserve Bank of Cleveland, Working Paper no. 0315 ; Working Papers
Abstract: This article offers a survey of the literature on foreign exchange intervention, including sections on the theoretical channels through which intervention might affect exchange rates and a summary of the empirical findings. The survey emphasizes that intervention is intended to provide monetary authorities with an means of influencing their exchange rates independent from monetary policy, and tends to evaluate theoretical channels and empirical results from this perspective.

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October, 2003 Federal Reserve Bank of Cleveland, Working Paper no. 0309 ; Alain P Chaboud; Working Papers
Abstract: The effectiveness of Japanese interventions over the past decade depended in large part on the frequency and size of the transactions. Prior to June 1995, Japanese interventions only had value as a forecast that the previous day's yen appreciation or depreciation would moderate during the current day. After June 1995, Japanese purchases of dollars had value as a forecast that the yen would depreciate. Probit analysis confirms that large, infrequent interventions, which characterized the later period, had a higher likelihood of success than small, frequent interventions.

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October 1, 2003 Federal Reserve Bank of Cleveland, Economic Commentary ; William R Melick; Economic Commentary
Abstract: To influence the supply of money and credit in the economy, most central banks target a short-term interest rate akin to the U.S. federal funds rate. With the rates in some countries falling to levels barely hovering above zero, some economists warn that central banks may face a danger that renders their actions with the interest rates ineffective: a liquidity trap. Foreign exchange interventions have been proposed as a way to escape, but will they work?

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April 1, 2003 Federal Reserve Bank of Cleveland Economic Commentary ; Eduard A Pelz; Economic Commentary
Abstract: Many people mistakenly believe that a sharp rise in the price of energy is necessarily inflationary. They fail to understand that energy prices adjust with the demand and supply of energy, whereas inflation responds to the demand and supply of money. This Economic Commentary explains that the Federal Reserve can do nothing about relative energy prices, but it can determine how relative energy-price shocks are reflected in the overall price level. Over the last 20 years, the inflationary consequences of energy-price shocks, while significant, have been fairly subdued.

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June 2002 Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 4 ; Policy Discussion Papers
Abstract: Sixteen countries now give the U.S. dollar legal-tender status. Although dollarizing can help emerging-market countries gain monetary credibility and avoid currency crisis, many do not want to give up the seigniorage revenues associated with issuing their own fiat currency. This article offers a proposal for seignoirage sharing.

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January, 2002 Federal Reserve Bank of Clevland, Working Paper no. 0215 ; Eduard A Pelz; Working Papers
Abstract: This paper investigates the relationship between energy-price shocks and three core measures of inflation in a vector autoregression model that incorporates measures of monetary policy and inflation expectations. The sample set includes data at monthly frequencies from 1980 through 2000. We find that that positive energy-price shocks have significant, though small, effects on all core price measures after a lag of 12 to 18 months, but that negative shocks have no discernable impact. The results suggest that relative energy-price changes do not distort the inflation signals that standard core-price measures provide.

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July 2001 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: U.S. firms are facing tough international competition, and the U.S. trade deficit has grown to a level that some find alarming. Why doesn’t the United States respond by easing monetary policy to lower the dollar’s exchange rate and reduce the price of U.S. goods in foreign markets? This Commentary argues that monetary policy is incapable of improving the competitive position of U.S. manufacturing through exchange rate manipulation. The temporary gains monetary easing might achieve through a nominal dollar depreciation would be offset by higher inflation and decreased foreign investment.

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January, 2001 Federal Reserve Bank of Cleveland, Working Paper no. 0110 ; Ben R Craig; Working Papers
Abstract: Sterilized intervention is generally ineffective. Countries that conduct monetary policy using an overnight, interbank rate as an intermediate target automatically sterilize their interventions. Nonsterilized interventions can influence nominal exchange rates, but they conflict with price stability unless the underlying shocks prompting them are domestic in origin and monetary in nature. Nonsterilized interventions, however, are unnecessary since standard open-market operations can achieve the same result.

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January, 2001 Federal Reserve Bank of Cleveland, Working Paper no. 0103 ; Joseph G Haubrich; Working Papers
Abstract: We apply a notion of power defined for coalitions derived from the Shapley value. We calculate the power of coalitions within a twelve-person committee, meant to correspond to the FOMC.

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2001 Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 2 ; Policy Discussion Papers
Abstract: Since 1992, the United States has enjoyed sustained, rapid economic expansion characterized by rising labor force participation, booming net investment spending for information equipment and computer software, and strong productivity growth. Substantial foreign capital inflows have helped to finance the investment boom as well as a rise in private domestic consumption spending. This paper illustrates how capital inflows can be both a bane and a boon to economic growth.

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September 1, 2000 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: Analysts caution that rapid foreign economic growth could induce a depreciation of the dollar, as international investors diversify their portfolios for higher returns abroad. Although we cannot establish a simple relationship between foreign growth and the dollar, we can conclude that if a desire to diversify out of dollars lies dormant among investors, faster growth abroad may stir it.

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March 15, 2000 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: Although Americans spent $1.3 trillion on foreign goods and services last year, many regard imports with hostility, preferring to “buy American.” But do imports really hurt the American economy? This Economic Commentary argues they do not. If anything, imports promote growth.

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February 1, 2000 Federal Reserve Bank of Cleveland, Economic Commentary ; William P Osterberg; Economic Commentary
Abstract: Foreign-exchange-market intervention is generally ineffective when undertaken independent of monetary policy. But when undertaken as a goal of monetary policy, exchange-rate management can compromise price stability. This Economic Commentary explains the difficulties of implementing an intervention policy.

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September 15, 1999 Federal Reserve Bank of Cleveland, Economic Commentary ; David E Altig; Economic Commentary
Abstract: In January, President Menem of Argentina proposed strengthening his country’s commitment to monetary stability by replacing the peso with the U.S. dollar. Dollarization leaves Argentina without a lender of last resort, but the Federal Reserve’s current operating procedure, together with existing Argentine arrangements, mitigates this drawback.

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January, 1999 Federal Reserve Bank of Cleveland, Working Paper no. 9918 ; Richard T Baillie; William P Osterberg; Working Papers
Abstract: Research has generally failed to find reliable connections between official exchange-market interventions and exchange rates that are consistent with either a monetary or a portfolio-balance theory of exchange-rate determination. Recently economists have suggested that intervention might sometimes influence exchange rates through its effects on agents' expectations. This survey discusses newer research that analyzes informational aspects of intervention.

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October 15, 1998 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: How long can we service our growing international indebtedness without causing economic disruption? This explanation of the current-account adjustment process provides fundamental knowledge that will enable the reader to form opinions about the state of affairs and to estimate the probabilities of possible outcomes.

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January, 1998 Federal Reserve Bank of Cleveland, Working Paper no. 9815 ; Working Papers
Abstract: U.S. exchange-market intervention has no apparent effect on market fundamentals but may influence expectations. If intervention can accurately forecast exchange-rate movements, knowledge that the Federal Reserve is trading can alter traders' prior estimates of the distribution of exchange-rate changes. This paper finds that U.S. intervention has value only as a forecast that recent exchange-rate movements will moderate but not that they will reverse.

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January 1, 1998 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: To understand the behavior of exchange rates, it is often useful to view them as consisting of two parts - a real exchange rate and a component reflecting domestic and foreign inflation differentials. Most important, however, is an appreciation of the crucial role that expectations play.

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September 1997 Federal Reserve Bank of Cleveland, Economic Review, vol. 33, no. 3, pp. 2-12 ; Economic Review
Abstract: An analysis of the forecast value of U.S. interventions in the foreign exchange market over the past seven years, which finds that official transactions by U.S. monetary authorities generally did not seem to improve the efficiency with which the foreign exchange market obtained information during this period.

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December 1996 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary

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March 1, 1996 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: An examination of the Federal Reserve's intervention successes in the late 1980s, showing that, although the characteristic day-to-day fluctuations in exchange rates virtually ensured that a large share of these interventions would appear successful - purely by chance and even in the absence of a causal link - the number of successes proved larger than pure randomness would suggest.

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January, 1996 Federal Reserve Bank of Cleveland, Working Paper no. 9608 ; Working Papers
Abstract: This paper estimates the unconditional and conditional probabilities that U.S. interventions successfully smooth short-term mark-dollar and yen-dollar exchange rates. The sample period extends from February 1987 to February 1990. Assuming a binomial distribution, the number of observed successes usually is greater than one would expect to see randomly. Results from a logit model suggest that coordinated intervention has a higher probability of success than unilateral intervention. The probability of success also increases with the dollar amount of an intervention. Other conditioning variables are not significant. The paper presents a reaction function, with adjustments for the incidentally truncated nature of intervention data. Predicted values serve as instruments for intervention in the logit models.

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April 1995 Federal Reserve Bank of Cleveland, Economic Review, vol. 31, no. 2 ; Jean M McIntire; Economic Review
Abstract: The usefulness of money lies in its ability to reduce transaction costs, but this in turn depends on the public's confidence in the stability of money's purchasing power. Governments that lack an established reputation for price stability must adopt strong institutional constraints on their ability to inflate if they hope to achieve monetary credibility. Recent events in Mexico, and the movement toward market-based development strategies in Eastern Europe, Latin America, and Asia, have kindled an interest in the pros and cons of currency boards as an institution for providing monetary credibility in developing countries -the subject of this article.

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March 15, 1995 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary

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June 15, 1994 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary

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April 1, 1994 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary

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Institutional aspects of U.S. intervention

 

March 1994 Federal Reserve Bank of Cleveland, Economic Review, vol. 30, no. 1, pp. 2-19 ; Economic Review

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June 15, 1993 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary

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August 1, 1992 Federal Reserve Bank of Cleveland, Economic Commentary ; Gerald H Anderson; Economic Commentary

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July 1992 Federal Reserve Bank of Cleveland, Economic Review, vol. 28, no. 3 ; Economic Review
Abstract: A commonly held belief is that aggregate U.S. fiscal policy measures- in particular, the federal budget deficit-are directly linked to U.S. interest rates, exchange rates, and the trade balance. Through the use of Engle-Granger cointegration tests and the development of simple two-period, two-country models, the author illustrates a complex relationship that depends on the distortionary nature of taxes and on relative differences between public and private propensities to consume and to import. Fiscal policies can cause trade deficits, but this need not be the case.

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January, 1992 Federal Reserve Bank of Cleveland, Working Paper no. 9207 ; William P Osterberg; Working Papers
Abstract: Germany, Japan, and the United States continue to view foreign exchange intervention as an effective instrument, although the mechanism through which it operates is unclear. In this paper, we use official data on daily dollar intervention to examine its impact on exchange-rate risk premia through both the portfolio-balance and expectations channels. We define the risk premium in terms of deviation from uncovered interest parity and model its behavior using generalized autoregressive conditional heteroscedasticity. Our evidence of portfolio-balance and expectations effects is inconsistent across subperiods of different exchange-rate-policy regimes. Also, unlike Dominguez (1990) and Loopesko (1984), we find no evidence that coordination of intervention improves its efficacy.

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January, 1992 Federal Reserve Bank of Cleveland, Working Paper no. 9203 ; Richard T Baillie; Working Papers
Abstract: An investigation of whether the G-3 nations (Germany, Japan, and the U.S.) successfully maintained target zones following the G-7's February 1987 Louvre meeting. Using daily, official intervention data and simultaneous-equation techniques, the authors determine that the G-3 reacted in a manner consistent with maintaining target zones, but find scant evidence that the intervention successfully influenced subsequent exchange-rate movements.

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October 1, 1991 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary

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April 1991 Federal Reserve Bank of Cleveland, Economic Review, vol. 27, no. 2 ; Economic Review
Abstract: Over the past two decades, during which floating exchange rates have been in effect, central banks have invested billions of dollars in an attempt to influence the path of exchange rates or the volatility of exchange rates around that path. The effectiveness of these efforts remains a controversial topic among both academic economists and policymakers. This review of recent literature on the subject finds some qualified support for intervention, but nothing to endorse the active interventionist policy undertaken in late 1985, mid-1987, and 1989.

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January 1991 Federal Reserve Bank of Cleveland, Economic Review, vol. 26, no. 1 ; Economic Review
Abstract: A wealth of studies about international macroeconomic policy coordination have surfaced in the past decade, offering important insights that unfortunately have remained inaccessible to many economists and policymakers because of the sophisticated mathematics inherent in the literature. This paper lifts the analytical veil from these studies, presenting their findings in a less-technical fashion.

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May 15, 1990 Federal Reserve Bank of Cleveland, Economic Commentary ; W. Lee Hoskins; Economic Commentary

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January, 1990 Federal Reserve Bank of Cleveland, Working Paper no. 9009 ; William P Osterberg; Working Papers
Abstract: Currency markets have witnessed a sharp increase in government intervention since 1985. Many observers believe that this intervention promoted the dollar's depreciation between 1985 and early 1987, and that intervention has since helped to stabilize dollar exchange rates. This paper tests for a systematic effect of daily dollar intervention on exchange rate risk premia. We test for both portfolio balance effects and signaling influences by using daily data on central bank intervention (in dollars) against both the yen and the West German mark. Following work by Dominguez (1989) and Loopesko (1984), we measure the daily risk premium in terms of the deviation from uncovered interest parity. However, we follow other empirical analyses of exchange rates and allow for generalized conditional autoregressive heteroscedasticity (GARCH). Some evidence is found for both the portfolio balance and signaling channels.

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Intervention and The Dollar

 

September 1, 1988 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary

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September 1, 1988 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: A study of U.S. intervention in the foreign exchange market between 1984 and 1987, concluding that exchange-rate stability among nations depends on fundamental macroeconomic policies, not intervention.

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July 1988 Federal Reserve Bank of Cleveland, Economic Review, vo. 24, no. 3 ; Economic Review

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June 1, 1988 Federal Reserve Bank of Cleveland ; Economic Commentary
Abstract: An examination of the developing-country debt problem, considering both the difficulty of obtaining and servicing foreign loans and the resource adjustments associated with consumption, investment, and trade patterns.

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Debt Repayment and Economic Adjustment

 

June 1, 1988 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary

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April 1988 Federal Reserve Bank of Cleveland, Economic Review, vol. 24, no. 2 ; Economic Review
Abstract: An analysis of U.S. foreign exchange-market intervention and its effect on dollar depreciation, finding there is no systematic relationship between intervention and daily exchange-rate movements.

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April 1, 1987 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: An analysis of the U.S. trade deficit, featuring an evaluation of the effectiveness of America’s effort to correct the deficit by promoting dollar depreciation and by encouraging the growth of foreign economies.

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February 1, 1987 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: A discussion of three channels through which U.S. intervention policy could theoretically influence the foreign-exchange market: the monetary channel, the portfolio-adjustment channel, and the expectations channel.

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August 1, 1986 Federal Reserve Bank of Cleveland, Economic Commentary ; Nicholas V Karamouzis; Economic Commentary
Abstract: An examination of proposals to improve the international monetary system by creating central exchange rates and a discussion of why such a policy might not be in the best interest of the United States.

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July 1986 Federal Reserve Bank of Cleveland, Economic Review, vol. 22, no. 3 ; Economic Review
Abstract: A review of three channels through which central bank intervention could alter exchange rates, concluding that sterilized intervention is a very limited policy tool.

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March 15, 1986 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: An analysis of possible effects on the U.S. economy of rapid depreciation of the foreign-exchange value of the dollar, that includes discussion on interest rates, prices, real GNP, and potential problems for the Federal Reserve System.

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January, 1986 Federal Reserve Bank of Cleveland, Working Paper no. 8608 ; Michael Bagshaw; Working Papers
Abstract: A look at whether the United States' decision to cease intervention after March 1981 had a perceptible influence on the day-to-day behavior of exchange rates, using the stable paretian distribution.

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January 1, 1986 Federal Reserve Bank of Cleveland, Economic Commentary ; Nicholas V Karamouzis; Economic Commentary
Abstract: A discussion of factors that affect determination of the dollar’s value in foreign-exchange markets, with an emphasis on various interpretations of the concept of equilibrium.

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September 1, 1985 Federal Reserve Bank of Cleveland, Economic Commentary ; Nicholas V Karamouzis; Economic Commentary
Abstract: An analysis of exchange-rate patterns and a discussion of factors thought to influence the strength of the dollar in the foreign exchange market.

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March 15, 1985 Federal Reserve Bank of Cleveland, Economic Commentary ; Michael F Bryan; Economic Commentary
Abstract: An examination of the possible impact on U.S. consumers and producers of placing an across-the-board tariff surcharge on imported goods.

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July 30, 1984 Federal Reserve Bank of Cleveland, Economic Commentary ; Michael F Bryan; Economic Commentary
Abstract: A discussion of the price and quantity effects on the U.S. consumer of the Japanese auto industry’s voluntary export restraint program.

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January, 1984 Federal Reserve Bank of Cleveland, Working Paper no. 8404 ; Working Papers
Abstract: This paper develops a simultaneous time-series model to investigate the daily interactions between official exchange-market intervention and movements in the deutsche mark-dollar exchange rate, from November 2, 1978, to October 31, 1979. the model is constructed using both morning-opening and afternoon-closing exchange-rate quotes, Using these two quotes, and making assumptions about the timing of intervention relative to the exchange-rate quotes, enables us to measure the causal relationships among contemporaneous variables, the results suggest that, over the period investigated, the Federal Reserve responded to exchange-rate movements in a manner consistent with a leaning-against-the-wind strategy, but that this intervention tended to accentuate slightly movements in the rate. This result seems to support claims that traders recognized intervention and traded against it.

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January 3, 1984 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: The precarious international debt situation clouds the economic outlook, worrying bank regulators and complicating international commerce.

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April 18, 1983 Federal Reserve Bank of Cleveland, Economic Commentary ; Gerald H Anderson; Economic Commentary
Abstract: An examination of causality between dollar exchange-rate movements and U.S. price levels as described by the relative purchasing power parity theory, with a discussion of channels of price pressure and of the Hooper-Lowrey method of estimating future trends of the dollar.

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November 1, 1982 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: An examination of possible ways in which large, persistent federal budget deficits could cause inflation through action on money-stock growth, velocity, and real gross national product (GNP).

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October 4, 1982 Federal Reserve Bank of Cleveland, Economic Commentary ; Amy Kerka; Economic Commentary
Abstract: This Economic Commentary discusses the criticisms of safe-harbor leasing that led to the demise of the program. Despite very real problems, however, safe-harbor leasing raises some important issues worthy of further consideration. Foremost among these is whether all firms should benefit from the use of corporate tax incentives for investment.

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July 27, 1981 Federal Reserve Bank of Cleveland, Economic Commentary ; Michael F Bryan; Economic Commentary
Abstract: The United States is embarking on an unprecedented increase. in peacetime military spending. The program has prompted heated discussions about the implications of defense spending for real output, employment, and prices.

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February 9, 1981 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: The Reagan administration has set itself to the herculean task of reducing the growth of federal spending.

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August 25, 1980 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: This Economic Commentary examines the behavior of the state and local sector’s budget during postwar business contractions.

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February 25, 1980 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: This Economic Commentary summarizes the president’s budget, highlighting the many uncertainties surrounding the estimates; it then places postwar budget trends in perspective.

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Title Date Publication Author(s) Type
The Myth of a Strong Dollar Policy

 

Winter 2003 Cato Journal, v. 22, no. 3., pp. 417-29 ; Ben R Craig; Journal Article

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Introduction: context, issues and contributions (Introduction to Conference Volume: Global Monetary Integration)

 

May 2001 Journal of Money, Credit, and Banking, v. 33, no. 2, pt. 2, pp. 303-311 ; Marco Del Negro; Alejandro Hernandez-Delgado; Elisabeth Huybens; Journal Article

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Intervention from an Information Perspective

 

September 1, 2000 Journal of International Financial Markets, Institutions, and Money, vol. 10, no. 3-4, Sept.-Dec. 2000, pp. 407-21 ; Richard T Baillie; William P Osterberg; Journal Article

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The United States as an Informed Foreign-Exchange Speculator

 

September 1, 2000 Journal of International Financial Markets, Institutions, and Money, vol. 10, no. 3-4, Sept.-Dec. 2000, pp. 287-302 ; Journal Article

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U.S. Intervention: Assessing the Probability of Success

 

November 1, 1999 Journal of Money, Credit, and Banking, vol. 31, no. 4, November 1999, pp. 731-47 ; Journal Article

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Exchange Rate Volatility

 

May 1999 Central Banking, vol. 9, no. 4, pp. 69-74 ; Gregory Hess; Journal Article

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Intervention and the Dollar's Decline

 

1998 In: Foreign Exchange Intervention: Objectives and Effectiveness, edited by S.C.W. Eijffinger, 1998, pp. 277-91 Elgar Reference Collection. International Library of Critical Writings in Economics, vol. 98. Cheltenham, U.K. and Northampton, Mass.: Elgar. ; Article in Book

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Review Of: Russian currency and finance: A currency board approach to reform (Hanke, Steve H.; Jonung, Lars; Schuler, Kurt; London and New York: Routledge, 1993)

 

December 1, 1996 Journal of Economic Literature, vol. 34, no. 4, December 1996, pp. 1994-1996 ; Journal Article

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Intervention and the Foreign Exchange Risk Premium: An Empirical Investigation of Daily Effects

 

March 1, 1992 Global Finance Journal, vol. 3, no. 1 (Spring 1992),.pp. 23-50. ; William P Osterberg; Journal Article

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1991 In: The International Finance Reader, 1991, pp. 36-39, Miami: Kolb ; Article in Book

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Avoiding Monetary Protectionism: The Role of Policy Coordination

 

October 1, 1990 The Cato Journal, vol. 10, no. 2, Fall 1990, pp. 541-55 ; W. Lee Hoskins; Journal Article

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January 1990 Federal Reserve Bank of Cleveland, Economic Review, vol. 26, no. 1 ; Economic Review
Abstract: A wealth of studies about international macroeconomic policy coordination have surfaced in the past decade, offering important insights that unfortunately have remained inaccessible to many economists and policymakers because of the sophisticated mathematics inherent in the literature. This paper lifts the analytical veil from these studies, presenting their findings in a less-technical fashion.

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Title Date Publication Author(s) Type
U.S. Intervention and the Risk Neutral Distribution of Exchange Rate Expectation as Revealed in Option Prices

 

2002 Forthcoming book by Central Banking Publications ; Ben R Craig; Article in Book

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Sterilized Intervention, Nonsterilized Intervention and Monetary Policy

 

2002 for a forthcoming book on intervention, accepted January 2001. Central Bank Journal ; Ben R Craig; Article in Book

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