TY  - JOUR
AU  - Bordo,Michael D.
AU  - Humpage,Owen F.
AU  - Schwartz,Anna J.
TI  - U.S. Foreign-Exchange-Market Intervention during the Volcker-Greenspan Era
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16345
PY  - 2010
Y2  - September 2010
UR  - http://www.nber.org/papers/w16345
L1  - http://www.nber.org/papers/w16345.pdf
N1  - Author contact info:
Michael D. Bordo
Department of Economics
Rutgers University
New Jersey Hall
75 Hamilton Street
New Brunswick, NJ 08901
Tel: 732/822-7152
Fax: 732/932-7416
E-Mail: bordo@econ.rutgers.edu

Owen Humpage
Federal Reserve Bank of Cleveland
P.O. Box 6387
Cleveland, OH  44101-1387
Tel: 216 579 2019
Fax: 216 579 3050
E-Mail: owen.f.humpage@clev.frb.org

Anna J. Schwartz
E-Mail: N/A user is deceased
AB  - The Federal Reserve abandoned foreign-exchange-market intervention because it conflicted with the System’s commitment to price stability.  By the early 1980s, economists generally concluded that, absent a portfolio-balance channel, sterilized foreign-exchange-market intervention did not provide central banks with a mechanism for systematically influencing exchange rates independent of their monetary policies.  If intervention were to have anything other than a fleeting, hit-or-miss, effect on exchange rates, monetary policy had to support it.  Exchange rates, however, often responded to U.S. monetary-policy initiatives, so intervention to offset or reverse those exchange-rate responses can seem a contrary policy move and can create uncertainty about the strength of the System’s commitment to price stability.  That the U.S. Treasury maintained primary responsibility for foreign-exchange intervention only compounded this uncertainty.  In addition, many FOMC participants feared that swap drawings and warehousing could contravene the Congressional appropriations process and, therefore, potentially pose a threat to System independence, a necessary condition for monetary-policy credibility.
ER  -