The Peterson Institute for International Economics held its semiannual Global Economic Prospects session on April 12, 2017. The topics included the US and global economic outlook, the future of fiscal policies under the new US administration, and the transition to a monetary tightening cycle, presented respectively by David J. Stockton, senior fellow; Karen Dynan, nonresident senior fellow; and Joseph E. Gagnon, senior fellow.
The outlook for macroeconomic policies in the United States and abroad will be critical in assessing global economic prospects over the next few years. In the United States, monetary policy now appears poised to enter a more sustained period of tightening. Central banks in other advanced economies may not yet be on the cusp of tightening, but the period of aggressive monetary accommodation may be coming to an end. Stockton will discuss the prospects and implications of an asynchronous tightening cycle for monetary policy in the US and global economies.
Meanwhile, the change in political leadership in the United States has created considerable uncertainty about future fiscal policies, with proposals for significant changes to tax and spending programs under active consideration. Karen Dynan, a nonresident senior fellow and, until recently, the assistant secretary of the Treasury for economic policy, will assess the prospects for changes in fiscal policies and the associated implications of these policies for macroeconomic developments in the United States.
The transition to a monetary tightening cycle in the United States in conjunction with possible fiscal stimulus, the differing cyclical positions of the major economies, and the current state of external imbalances will affect the trajectory of exchange rates. Joseph Gagnon, senior fellow, will take stock of these influences and their economic implications. He will also assess the possible reactions of policymakers in the United States and abroad, including current evidence on currency manipulation.