World trade has increased much faster than world output over the last 30 years and international capital flows have expanded at a still more rapid pace. As a result, forecasting and modeling the national economic developments and the conduct of domestic policy has increasingly required more careful attention to the global context.
My focus is on how globalization has affected the conduct of U.S. monetary policy. I begin by documenting the trend toward increased openness of the U.S. economy. With that background in place, I turn to the implications of increased openness for the conduct of U.S. monetary policy. The views I present here about the conduct of monetary policy are my own.