Bernanke rules out currency wars

As we said in the title, Ben Bernanke has ruled out that monetary policy in developed nations is akin to a “currency war”:

The lessons for the present are clear. Today most advanced industrial economies remain, to varying extents, in the grip of slow recoveries from the Great Recession. With inflation generally contained, central banks in these countries are providing accommodative monetary policies to support growth. Do these policies constitute competitive devaluations? To the contrary, because monetary policy is accommodative in the great majority of advanced industrial economies, one would not expect large and persistent changes in the configuration of exchange rates among these countries. The benefits of monetary accommodation in the advanced economies are not created in any significant way by changes in exchange rates; they come instead from the support for domestic aggregate demand in each country or region. Moreover, because stronger growth in each economy confers beneficial spillovers to trading partners, these policies are not “beggar-thy-neighbor” but rather are positive-sum, “enrich-thy-neighbor” actions.

I’ve heard this point a few times in the past (here, here, here, here, here, here) … and those are just the links on this blog ;).  You’ll also note that the third one quotes Bernanke … so hearing him say this is hardly surprising.

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  1. […] The first channel is cool, that is relative monetary policy.  As long as everyone involved is setting an “inflation target” and sticking to it then this is just a product of all the countries “closing their output gap” – and it is a good thing for all.  Not a currency war. […]

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