The 2023 Finch Public Lecture was presented by Professor Maurice Obstfeld, University of California, Berkeley, on Tuesday 4 April, 2023.
The U.S. dollar’s nominal effective exchange rate closely tracks global financial conditions, which themselves show a cyclical pattern. Over that cycle, world asset prices, leverage, and capital flows move in concert with global growth, especially influencing the fortunes of emerging and developing economies (EMDEs).
After the initial market panic and upward dollar spike at the start of the COVID-19 pandemic, the dollar fell as global financial conditions eased; but the higher inflation that followed has induced central banks everywhere to tighten monetary policies more recently.
The dollar strengthened considerably after mid-2021 and a contractionary phase of the global financial cycle ensued, but the dollar's exchange rate has moderated recently, and accordingly, global financial conditions have eased. The dollar's continuing centrality to the international monetary system has belied predictions in the early 1970s that floating exchange rates would make the dollar less central to the world economy.