Fed Policy Is Very Volatile, Former IMF Economist Obstfeld Says

The transcript discusses the challenges central bankers face due to trade wars and the unpredictability of economic policies. It highlights the global impact of US monetary policy, particularly the dominance of the dollar and its effects on emerging markets. The discussion also covers the Fed's policy considerations, including the need to account for global effects and the impact of trade tensions on emerging markets. The importance of modeling global effects in the Fed's policy decisions is emphasized.

What are the two main reasons that make it difficult for central bankers to make policy decisions during trade wars?

• Central banks have limited authority over trade policies.

• Trade wars are short-lived and have minimal impact.

• There is a lack of historical data and economic models.

• The effects are unpredictable and policies are politically driven.

Why is the US dollar considered special in the context of global economics?

• It is backed by gold reserves.

• It is the oldest currency in circulation.

• It is the world's dominant reserve and funding currency.

• It is the only currency used in international trade.

How do the actions of the US Federal Reserve affect emerging markets?

• They can lead to currency depreciation in emerging markets.

• They have no impact on emerging markets.

• They increase investment in emerging markets.

• They stabilize emerging market economies.

What is the potential benefit of the Fed adopting a more accommodative posture in response to trade tensions?

• It causes inflation in the US.

• It increases trade tensions.

• It helps reverse negative impacts on emerging markets.

• It leads to higher interest rates.

What does the speaker suggest about the Fed's approach to global economic modeling?

• The Fed should increase interest rates globally.

• The Fed should focus solely on domestic issues.

• The Fed should model the global economy in more detail.

• The Fed should ignore global impacts.