Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.
Yes.
The positive contribution from net exports last year, about ⅓ percentage point, is entirely a surprise. In fact, it would have been negative, if I am reading our model correctly.
People often talk about China’s reserve accumulation affecting U.S. interest rates, but they are only two countries in a big world and you may think that the United States, Europe, and Japan have relatively open financial markets with a lot of mobility. If you look at all the ...
The relationship between the official flows and the current account surpluses?
This topic is actually close to my heart in terms of research, and I wish I could say it was so and maybe it will be so. [Laughter] I thought it was so around 2000, when we had really strong exports we couldn’t explain, and then it all went ...
Well, the export contribution to GDP growth last year was about ⅓ percent, and I would have to check, but I’m guessing that it might have still been zero if we hadn’t had this surprise. It would have been close to zero. I can check on that.
They are close to what we think their potential rates are, and they don’t seem to be above or below their potential rates by very much in the aggregate. There are a few exceptions, of course—Argentina, perhaps, and Venezuela.
Actually, I’m not sure of the answer about unit labor costs per se, but these growth rates are close to what we think these countries can sustain without exceeding their capacity limit.
That’s correct.
Your first international exhibit (exhibit 9) covers recent market developments. As shown by the green line in the top left panel, oil prices dropped further this month, bringing the West Texas intermediate spot price back to pre- Katrina levels. The IMF index of nonfuel commodity prices (the red line) was ...
That’s a very good question. I don’t sense that it is that important. A movement in foreign exchange intervention of, say, $100 billion or so in the model is not going to swamp the exchange rate, if that’s what you’re saying. Is the portfolio balance built ...
In that we had a somewhat different model simulate a rise and fall in the current account balance. I’m not sure that we are here to hang our hat on one explanation for the rise and fall of the current account; clearly a number of things were going on ...
You are referring to the background paper that we circulated?
I think we agree on what we’ve seen in the past and, of course, we both are wondering what will happen in the future. I’d just like to say that I believe a lot of the differences in our views come from how we think about commodities. That ...
About 25.
And in the staff model, it would be about $1.00 of trade adjustment for every $3.00 of fiscal contraction.
In that case, in the bottom left panel, the dotted black line goes down to minus 1½ percent rather than minus 2½ percent.
No, because they just barely hit the zero bound. So, it’s true that if you’re looking at the effect on their GDP—is that what you’re looking at?
Yes, but just barely. In scenario 2 they are quite strongly constrained; in scenario 1 they just barely hit the zero-bound constraint. I could tell you how much they would have to lower rates if there were no zero bound: Japanese rates would be down 300 basis points, and euro ...
In scenario 1, we have the federal funds rate following a Taylor rule. The funds rate increases 70 basis points in the first half and gradually moves up about 200 basis points. I don’t have a weighted foreign adjustment, but I can tell you that, in the case of ...
Fiscal policy certainly could help. The models are such that if you want to hit a target, you can raise or lower taxes or raise spending enough to help to some extent. You might not like the other consequences. But the answer to your question is yes. While we did ...
There would be dynamic feedbacks. We use the FRB/Global model, which will simultaneously capture both effects—from the United States on foreign economies and from foreign economies on this country. So, yes, it’s a property of the model that things that happen in the United States have a ...
We have looked, partly at your suggestion, into whether the lags might have changed, because I think the mechanism you are talking about would likely show up as a longer pass-through lag. Obviously we don’t have enough data to determine if this is a recent change in the past ...
Mr. Chairman, may I?
Your next exhibit considers the implications for both the U.S. and foreign economies of an abrupt depreciation of the dollar that could be associated with a disorderly adjustment. As described in the top left panel, we examine three scenarios that build on each other using the staff’s FRB ...
