USA Exchange Rate Developments 1970-2018 Bretton Woods Created - - PowerPoint PPT Presentation

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Nov 14, 2023 445 likes •657 views

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

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USA Exchange Rate Developments 1970-2018

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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

SLIDE 3

Unemployment 1973-1980

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Inflation 1973-1980

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Effective Federal Funds Rate 1973-1980

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Combined data series

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Trade Weighted USD Index 1973-1980

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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

SLIDE 9

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.

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Inflation (1978-2000)

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Effective Federal Funds Rate 1978-2000

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Unemployment (1978-2000)

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SLIDE 14

Trade Weighted USD Index 1978-2000

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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

SLIDE 16

SLIDE 17

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

SLIDE 18

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

SLIDE 19

USD Exchange Rate 2000-2018

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