Category: Currency, Federal Reserve, Think Tank

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3 Responses to “The Effects of Unconventional and Conventional U.S. Monetary Policy on the Dollar”

  1. Herman Frank says:

    I love it! ” …we find that monetary policy now has much the same bang per surprise on the value of the dollar as previously: roughly 6 bp change per unit surprise…. ”
    Concluding we may state “The more things change, the more things stay the same!”

    That would all be good and nice, but if you are trying to decide whether to re-shore, off-shore, import or export, face your competitors coming in, or face them on their home turf then the uncertainty becomes nothing more than a gamble. Which might cost you dear!

    It’s the end of blissful $-currency insulation – the time that you could say “OK, I’ll invoice for the next contract period in Dollars/Kiwi/Aussie/Euro/Yen”. That is over with the uncertainty of the quoted “bang per surprise”-variables.

    Instead, you have to carefully consider your markets, hedge the sales contract, hedge the raw materials contract, and pray that the institution which makes the counter-party risk doesn’t go bust (because it ran into a whale). Oh, and did anyone say that your client has to pay?!

    Surprise! “Your entrepreneurial skills are going to be challenged!” What a wonderful life! Yeaha!