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Strained RelationsUS Foreign-Exchange Operations and Monetary Policy in the Twentieth Century$
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Michael D. Bordo, Owen F. Humpage, and Anna J. Schwartz

Print publication date: 2015

Print ISBN-13: 9780226051482

Published to Chicago Scholarship Online: September 2015

DOI: 10.7208/chicago/9780226051512.001.0001

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US Foreign-Exchange-Market Intervention during the Volcker-Greenspan Era, 1981–1997

US Foreign-Exchange-Market Intervention during the Volcker-Greenspan Era, 1981–1997

(p.268) 6 US Foreign-Exchange-Market Intervention during the Volcker-Greenspan Era, 1981–1997
Strained Relations

Michael D. Bordo

Owen F. Humpage

Anna J. Schwartz

University of Chicago Press

During the Volcker-Greenspan chairmanships, the FOMC looked to rebuild the Federal Reserve’s credibility. As tight monetary and loose fiscal policies strengthened the dollar, US political pressures prompted the United States to once againintervene in the foreign-exchange market. In this chapter, we discuss and evaluate the minimalist intervention period, the Plaza and Louvre accords, and the controversial post-Louvre operations. After 1987 and through the early 1990s, the FOMC increasingly viewed Treasury-motivated foreign-exchange interventions as a corrosive forcethat impinged on the Federal Reserve’s credibilityby creating uncertainty about the direction of monetary policy,the Federal Reserve’s independence, and the FOMC’s commitment to price stability. We also explain how the Mexican peso crisis caused the FOMC to recoil from warehousing and to limit itsswap operations.

Keywords:   Jurgensen Report, Lourve accord, Plaza accord, Mexican Peso Crisis

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