Kenneth Rogoff: belief

Transcript context

…Do you think we need a good theory of both real and nominal exchange rates to make reliable policy recommendations? If we don’t really know what the exchange rate will be doing and why, doesn’t that put us in the slightly odd position that we’re saying do this, do that, but the most fundamental price variable is a mystery to us? As you may know, I think my first important paper was showing how hard it was to explain exchange rates. I’m embarrassed to say it’s like 45 years ago. I think the policy conclusions people drew out of that is, don’t look at the exchange rate. When you’re trying to figure out what policy should be, look at inflation rate, look at output. I think for some countries, they’re so deep into dollar debt, they’re so connected with the dollar and trade, they do worry about their exchange rate. It depends on if you’re talking about a big country like the United States, or are you talking about New Zealand or something like that. I think generally, policymakers need to recognize there’s a lot of noise. Trying to target the exchange rate is a fool’s game. If the Trump administration’s trying to do it, they might get lucky, but it’s pure luck. If I take the country of Pakistan, I think it’s now been through maybe 23 or 24 IMF bailouts. That’s a lot. The problems aren’t fixed, so we would all say here’re ways Pakistan could improve. Probably you and I would largely agree on those. Just from an external point of view — say you’re dictator of the IMF, you’re the managing director, you’re the board, you’re the staff — what is it you would actually do with Pakistan?…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.