In the early 1970s, we shifted from fixed exchange rates under the Bretton Woods system to the present arrangements, in which the dollar's value against major currencies is set by market forces. This change and the steady trends toward greater openness and integration that I described earlier have exposed our economy more directly to the effects of foreign developments.
Swings in business cycles abroad, disruptions to the supply of imported goods like oil, and variations in exchange rates have left their imprint on the U.S. economy over the past thirty years.