The Fed's recent tapering has had its effects on the US economy
but the issue seems to come with the effects on other nations. Willem Buiter,
the chief economist at Citi bank, says the Fed has not said a thing about the effects
tapering has had overseas and that they have displayed bad manners in doing so.
The governor of the Reserve Bank of India
(RBI) would like to see more co-operations between the central banks. Because
the US is such a big country with such big influence around the world the
leaders of the other world banks would like more interaction with the US Fed in
order to better plan monetary policies.
Cross-border financial flows from the US
are extremely large and because the majority of the US's foreign liabilities
are held in the dollar the international liabilities fall when the dollar falls
at home. It seems as if the Fed only cares about the immediate needs of the US
but, this plays both ways with other international central banks. Since the
other banks are not as big as the US Fed they do not have as big of an effect elsewhere.
We should see some concern come from the
Fed in the near future as many of the other central banks are upset. We can expect
to see some kind of meeting/discussion with the other banks to try and get on
the same page as US Fed.
1 comment:
The Fed actually has a huge stake in international economic affairs. I'm sure that if the RBI frames their request in a way that encompasses US interests, they can get tons of cooperation.
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