Monetary Contraction Update

Arnold Kling

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The WSJ blog writes,

Since the start of September, the greenback is up 19% against the Brazilian real, 18% against the South African rand and nearly 9% against the Korean won. It's up more than 7.5% against the Indian rupee.

Which is what a monetarist would expect if U.S. monetary policy were contractionary. Don't tell Scott Sumner about this. He'll think he's vindicated or something.

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CATEGORIES: International Macroeconomics: Exchange Rates, International Debt, etc. , Monetary Policy

COMMENTS (3 to date)

Latest Comment

effem writes:

Perhaps foreign monetary policy is just more contractionary.

Posted September 23, 2011 11:30 AM

fundamentalist writes:

Another explanation is that monetary policy isn't as effective as Sumner et al think. The rabid monetarists are so certain of the power of monetary policy that they find it impossible to even imagine failure. So they claim that it hasn't been tried.

Monetary policy has had 3 years and it has failed miserably. Give up on it!

Posted September 23, 2011 5:19 PM

fundamentalist writes:

FX don't say much about domestic policy. Brazil and S. Africa are natural resource rich and commodity prices have been rising rapidly, which would increase demand for those currencies.

And as effem wrote, US policy could be very loose an still be tighter than other countries.

Posted September 23, 2011 5:33 PM

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