USA Exchange Rate Developments 1970-2018
Bretton Woods ● Created at the end of World War II ● Fixed exchange rate regime ● Dollar pegged to gold ● Other currencies pegged to the dollar ● Ended in 1973
Unemployment 1973-1980
Inflation 1973-1980
Effective Federal Funds Rate 1973-1980
Combined data series
Trade Weighted USD Index 1973-1980
The Volcker and Early Greenspan Eras (1980’s and 1990’s) Paul Volcker and the Federal Funds Rate ● ● Inflation Scares ● Contractionary Monetary Policy, but Expansionary Fiscal Policy ● Dollar Depreciation ● Plaza and Louvre Accords ● Alan Greenspan, Monetarism, and Continuity
Paul Volcker ● Volcker served as Chairman of the Federal Reserve from 1979 - 1987 under President Carter and President Reagan. ● Although his policies received criticism at the time, he is now widely credited for helping to bring the inflationary period of the 1970’s to an end.
Inflation (1978-2000)
Effective Federal Funds Rate 1978-2000
Unemployment (1978-2000)
Trade Weighted USD Index 1978-2000
Early 2000s ● George W. Bush and Alan Greenspan ● Sept. 11th and Dot-com bubble - expansionary fiscal policy ● Expansionary Monetary policy 2000-2004, Contractionary 2004-2007. ● Housing bubble ● 200 Ben Bernanke
2008 Financial Crisis and the Great Recession What caused the crisis? ● Historically low interest rates 2000-2004 ● Rise in mortgage defaults - “sub-prime” ● Sub-Prime mortgages securitized, bundled with other assets ● Rated AAA ● Many institutions had large exposure to sub-prime loans ● Banks were over leveraged ● Banks had taken out insurance ● Result of defaults - chain reaction, “credit crunch” ● Increased risk premium - decreased Investment
FED’s response to Recession ● Ben Bernanke and Henry Paulson ● Expansionary Monetary Policy - Interest Rates hit zero lower bound ● Expansionary Fiscal Policy - TARP program ● Recession officially ends in June 2009 - slow growth ever since ● Low interest rates maintained ● Janet Yellen - first interest rate hike in 8 years (2016) ● Jerome Powell - continuing interest rate hikes
USD Exchange Rate 2000-2018
Conclusion
Recommend
More recommend
