Monday, February 28, 2011

Global inflation and US monetary policy

I was planning to write a short note on the (lack of a) link between US monetary policy and global inflation but David Altig (from the Atlanta Fed) says is as well as I can:

"If the United States unwisely floods the world with dollars, driving down the international value of the dollar, countries with flexible exchange rates would see the value of their currencies rise—making food grains and oils denominated in dollars more affordable, not less. The only way inflation gets exported to these other countries is if they attempt to maintain the values of their currencies below the levels that markets would otherwise take them. That inflation is purely homegrown."

The full article can be found here.

Antonio Fatás