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...

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...

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...

An argument against attempts to achieve current-account objectives through monetary manipulation of nominal exchange rates, with an explanation of why such tampering--which for various reasons might appear politically attractive--ultimately harms economic welfare.

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...

An examination of the connections between monetary policy changes, shifts in aggregate spending, and adjustments to production, showing that although a central bank may periodically exploit the connection between short-term monetary expansions and real economic growth, frequent attempts may...