China &World Economy 最新文献



Abstract
The international dollar standard ismalfunctioning. Near-zero US short-term interest rates
launch massive hot money outflows into emerging markets (EM) in Asia and Latin America.
Each EM central bank buys dollars to prevent its currency from appreciating but loses
monetary control. Despite some appreciation, average inflation in EMs is nowmuch higher
than in the old industrial economies and world commodity prices are bid up sharply. This
inflation on the dollar’s periphery only registers in the US CPI with a long lag. However, the
more immediate effect of the Fed’s zero interest rate is to upset the process of bank
intermediation within the American economy. Bank credit continues to decline while
employment languishes. Therefore, constructive international monetary reform calls for the
Fed to abandon its zero-interest rate policy, which is best done in cooperation with the
European Central Bank, the Bank of Japan, and the Bank of England also abandoning their
ultra low interest rates.