U.S. Monetary Policy and the Dollar Roberto Chang February 2012.

U.S. Monetary Policy and the Dollar

Roberto ChangFebruary 2012

80

100

120

140

160

180

200

220

Jan-00Jan-01

Jan-02Jan-03

Jan-04Jan-05

Jan-06Jan-07

Jan-08Jan-09

Jan-10

USA: Real Estate Price Index(S&P/Case-Shiller 20 City Composite Index)Source: MacroMarkets

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

6/28/2000

12/28/2000

6/28/2001

12/28/2001

6/28/2002

12/28/2002

6/28/2003

12/28/2003

6/28/2004

12/28/2004

6/28/2005

12/28/2005

6/28/2006

12/28/2006

6/28/2007

12/28/2007

6/28/2008

12/28/2008

6/28/2009

12/28/2009

US: Federal Funds Rate (Percentage)Source: FRED, St. Louis Fed

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

6/28/2000

12/28/2000

6/28/2001

12/28/2001

6/28/2002

12/28/2002

6/28/2003

12/28/2003

6/28/2004

12/28/2004

6/28/2005

12/28/2005

6/28/2006

12/28/2006

6/28/2007

12/28/2007

6/28/2008

12/28/2008

6/28/2009

12/28/2009

US: Federal Funds Rate (Percentage)Source: FRED, St. Louis Fed

60

70

80

90

100

110

120

6/26

/200

0

12/2

6/20

00

6/26

/200

1

12/2

6/20

01

6/26

/200

2

12/2

6/20

02

6/26

/200

3

12/2

6/20

03

6/26

/200

4

12/2

6/20

04

6/26

/200

5

12/2

6/20

05

6/26

/200

6

12/2

6/20

06

6/26

/200

7

12/2

6/20

07

6/26

/200

8

12/2

6/20

08

6/26

/200

9

12/2

6/20

09

Trade Weighted U.S. Dollar IndexFuente: FRED, St. Louis Fed

Figure 4.10 U.S.–Eurozone Interest Rates and Exchange Rates, 1999–2004Feenstra and Taylor: International Macroeconomics, Second EditionCopyright © 2012 by Worth Publishers

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

Jan-

99

Jul-9

9

Jan-

00

Jul-0

0

Jan-

01

Jul-0

1

Jan-

02

Jul-0

2

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Real Interest Rates, 1999-2006

10-Year 3-7/8% Treasury Inflation-Indexed Note. Source: FRED, Federal Reserve Bank of St. Louis

-1

0

1

2

3

4

5

1/3/2006

5/3/2006

9/3/2006

1/3/2007

5/3/2007

9/3/2007

1/3/2008

5/3/2008

9/3/2008

1/3/2009

5/3/2009

9/3/2009

1/3/2010

5/3/2010

TED Spread (LIBOR Versus T-Bill, percentage points)

Northern Rock

Bear Stearns

Lehman

0

500000

1000000

1500000

2000000

2500000

2004

-01

2004

-06

2004

-11

2005

-04

2005

-09

2006

-02

2006

-07

2006

-12

2007

-05

2007

-10

2008

-03

2008

-08

2009

-01

2009

-06

2009

-11

2010

-04

Total

Asset Backed

Financial, Non Asset Backed

Non Financial, Non Asset Backed

Commercial Paper Market(Millions US$)

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

Jan-

05

Apr-0

5

Jul-0

5

Oct-05

Jan-

06

Apr-0

6

Jul-0

6

Oct-06

Jan-

07

Apr-0

7

Jul-0

7

Oct-07

Jan-

08

Apr-0

8

Jul-0

8

Oct-08

Jan-

09

Apr-0

9

Jul-0

9

Oct-09

Jan-

10

US: GDP Growth (% last 12 months)Source: FRED, St. Louis Fed

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

6/28/2000

12/28/2000

6/28/2001

12/28/2001

6/28/2002

12/28/2002

6/28/2003

12/28/2003

6/28/2004

12/28/2004

6/28/2005

12/28/2005

6/28/2006

12/28/2006

6/28/2007

12/28/2007

6/28/2008

12/28/2008

6/28/2009

12/28/2009

US: Federal Funds Rate (Percentage)Source: FRED, St. Louis Fed

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

6/28/2000

12/28/2000

6/28/2001

12/28/2001

6/28/2002

12/28/2002

6/28/2003

12/28/2003

6/28/2004

12/28/2004

6/28/2005

12/28/2005

6/28/2006

12/28/2006

6/28/2007

12/28/2007

6/28/2008

12/28/2008

6/28/2009

12/28/2009

US: Federal Funds RateSource: FRED, St. Louis Fed

0

500000

1000000

1500000

2000000

2500000

28-Apr-07 14-Nov-07 1-Jun-08 18-Dec-08 6-Jul-09 22-Jan-10 10-Aug-10 26-Feb-11

Federal Reserve: Total Assets(Millions of US$)Source: Board of Governors

Selected Federal Reserve Assets(Billions of US$)Source: Board of Governors

0

500000

1000000

1500000

2000000

2500000

2008

-01-

02

2008

-03-

19

2008

-06-

04

2008

-08-

20

2008

-11-

05

2009

-01-

21

2009

-04-

08

2009

-06-

24

2009

-09-

09

2009

-11-

25

2010

-02-

10

2010

-04-

28

2010

-07-

14

2010

-09-

29

Securities held outright

Federal Agency Debt

Mortgage Backed

Treasuries

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

28-Apr-07

14-Nov-07

1-Jun-08 18-Dec-08

6-Jul-09 22-Jan-10

10-Aug-10

26-Feb-11

All Liquidity Facilities*

Term Auction Credit

Commercial Paper Funding Facility

Central Bank Liquidity Swaps

Term Asset-Backed Securities LoanFacility

Emergency Liquidity Programs(Billions of US$)

0

500000

1000000

1500000

2000000

2500000

2007

-01-

03

2007

-02-

28

2007

-04-

25

2007

-06-

20

2007

-08-

15

2007

-10-

10

2007

-12-

05

2008

-01-

30

2008

-03-

26

2008

-05-

21

2008

-07-

16

2008

-09-

10

2008

-11-

05

2008

-12-

31

2009

-02-

25

2009

-04-

22

2009

-06-

17

2009

-08-

12

2009

-10-

07

2009

-12-

02

2010

-01-

27

2010

-03-

24

2010

-05-

19

Federal Reserve: Securities Held(Billions US$)Source: Board of Governors

Total

T BillsMortgage Backed Securities Freddie, Fannie

0

200000

400000

600000

800000

1000000

1200000

1400000

28-Apr-07 14-Nov-07 1-Jun-08 18-Dec-08 6-Jul-09 22-Jan-10 10-Aug-10 26-Feb-11

Cash in Circulation

Bank Reserves

Treasury Deposits

Pasivos de la Reserva Federal(Millones de US$)

Unnumbered Figure 4.1 A broken transmission: the Fed’s extraordinary interventions did little to change private credit market interest rates in 2008–2009Feenstra and Taylor: International Macroeconomics, Second EditionCopyright © 2012 by Worth Publishers