Steven Kamin on the Global Influence of Fed Policy and the U.S. Dollar
Macro Musings with David Beckworth
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The Effect of the Fed's Tightening on the Global Economy
The Fed can't set the global interest rate on a sustained basis, right? It might have temporary effects, but over the medium long run, the fundamentals will drive the global equilibrium real interest rate. In the short run though, there's a money of you, credit preference theory, of Keynes, that the central bank, the Fed can adjust them. And so when the Fed is basically moving interest rates up and down, kind of like on a near-termmedium-term basis, it's not doing that just because of these liquidity preference issues. It's actually an attempt to match the movements in the short run R-Star with those longer term factors.
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