Exchange rates movements are again attracting a lot of attention as a focal point in the policy debate. Prolonged recession following the global financial crisis has pushed most advanced economies into liquidity traps where domestic monetary policy is severely limited. The exchange rate offers an alternative option for boosting aggregate demand in a liquidity trap. However, the exchange rate channel may have global repercussions through spillover effects on international goods and financial markets. Emerging market policymakers, in particular, have raised warnings about excessive exchange rate movements arising from advanced economy stimulus. A further risk arises from the exchange rate implications of US monetary policy `normalization’. This conference hopes to bring together new empirical and theoretical research on all aspects of exchange rates, their role in domestic macroeconomic policy as well as the global trade and financial system.

Silvana Tenreyro, Gregory Thwaites, 12 November 2013

Governments wary of fiscal expansion have turned to monetary policy to stimulate slowly recovering economies. This column presents evidence that lowering interest rates is ineffective during recessions – just when fiscal policy would be most effective. If this result is robust, we are seeing recent signs of recovery in spite of austerity, not because of it.

Olivier Blanchard, 10 June 2003

Written June 2003: Between falling oil prices, aggressive macro policies and the falling dollar, it is hard to see what stands in the way of a strong recovery in the US. But in Europe, monetary caution, self-imposed fiscal constraints and euro appreciation all point to the dual dangers of deflation and a prolonged slump.

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