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Monetary Policy and the Dollar’s Decline

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Third-quarter GDP growth in the euro area and Japan came in lower than analysts had anticipated, prompting many foreign policymakers to complain that the dollar’s renewed depreciation poses a major downside risk to their countries’ future economic growth. Dollar depreciation shifts worldwide demand toward U.S. goods and services by raising the dollar price of foreign items and lowering the foreign-currency price of U.S. products. What can policymakers do?

Suggested citation: "Monetary Policy and the Dollar’s Decline," Federal Reserve Bank of Cleveland, Economic Trends, no. 04-12, pp. 08, 12.01.2004.

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