Hippolyte Fofack
In 1971, US Treasury Secretary John Connally famously told his counterparts in the G10 that “the dollar is our currency, but it’s your problem.” Connally was being unexpectedly candid about the fact that, even though the greenback was the world’s main reserve currency, its foremost purpose was to advance US interests.
That remains true today. But in recent decades, the dollar’s central role in global trade and finance has posed more of a problem for emerging-market and developing economies (EMDEs) than for the world’s rich countries. For example, the US Federal Reserve’s current tightening cycle – like others before it – has disproportionately affected EMDEs by fuelling massive and inordinate capital outflows. This, in turn, has triggered currency gyrations that exacerbate macroeconomic challenges and increase debt-servicing costs, resulting in limited fiscal space for public investment.
Recent monetary-policy divergences between the Fed and other advanced-economy central banks are, however, stoking exchange-rate volatility in the world’s rich countries. The spillovers from the Fed’s higher-for-longer policy position are perhaps most pronounced in Japan, which has recently taken to intervening in foreign-exchange markets to stem the yen’s rapid slide.
No comments:
Post a Comment