Working Paper: NBER ID: w22388
Authors: Olivier Blanchard
Abstract: The strong monetary policy actions undertaken by advanced economies' central banks have led to complaints of “currency wars” by some emerging market economies, and to widespread demands for more macroeconomic policy coordination. This paper revisits these issues. It concludes that, while advanced economies' monetary policies indeed have had substantial spillover effects on emerging market economies, there was and still is little room for coordination. It then argues that restrictions on capital flows were and are a more natural instrument for advancing the objectives of both macro and financial stability.
Keywords: currency wars; capital controls; monetary policy
JEL Codes: F3; F33; F42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| AE monetary policy (E52) | EM exports (Y60) |
| AE monetary policy (E52) | EM output (Y20) |
| AE monetary policy (E52) | EM exchange rate appreciation (F31) |
| Capital controls (F38) | mitigate adverse effects of AE monetary policy on EMs (E63) |