US central bank head Ben Bernanke has been defending its aggressive stimulus measures.
To try to keep long-term borrowing costs low, the Federal Reserve has been printing money to buy back government bonds. Critics say has risks hurting other economies through a currency war.
Not so said Bernanke: “Because stronger growth in each economy confers beneficial spillovers to trading partners, these policies are not ‘beggar-thy-neighbor’ but rather they are positive-sum, ‘enrich-thy-neighbor’ actions.”
Speaking at a conference of academics and top policymakers in London, Bernanke said with the global economy being as integrated as it is the whole world benefits from a sturdier US outlook.
“The distinction between monetary policies aimed at domestic objectives and trade-diverting exchange rate devaluations and other protectionist measures is critical,” Bernanke added.
Asked about the eurozone, the Fed chairman said the current problems there show the difficulties of operating a single currency across several countries.
“There is a basic question – what is the right size for a single monetary policy?” Bernanke said in response to a question at the panel discussion.
While some aspects of the eurozone were optimal, including the credibility of its central bank to deliver low inflation, there were also differences across countries in terms of competitiveness and their different stages in the economic cycle, he said.
“So I think it is a mixed picture,” Bernanke said.