Exchange-rate management and monetary-policy mismanagement: A study of Germany, Japan, United Kingdom, and United States after plaza: A comment

Abstract

William Poole argues that international agreements-in particular, the Plaza and Louvre agreements-importantly affected the monetary policies of the United States, Germany, Japan, and the United Kingdom. In addition, he shows that bond and stock markets were little affected by important events in the foreign-exchange market. While I agree with many of Poole’s arguments, I disagree with some of his conclusions. At a basic level, our differences can be seen in the title of the paper: “Exchange-Rate Management and Monetary Policy Mismanagement: A Study of Germany, Japan, United Kingdom, and the United States After Plaza.“ I think a better title would be: “Exchange-Rate Mismanagement and Monetary Policy Management: A Study of Germany, Japan, United Kingdom, and the United States After Plaza.” Exchange-rate mismanagement applies because agreements to stabilize or depreciate the exchange rate could lead to bad monetary policy. Various macro policies-such as fiscal or monetary policy, exchange-market intervention, or capital controls-could be used to stabilize or depreciate the dollar.