Discussion of “Did Easy Money in the Dollar Bloc Fuel the Oil Price Run-Up?”

This paper addresses a traditionally sensitive issue concerning the international spillovers from the U.S. monetary policy. The issue is sensitive because many observers feel that U.S. monetary authorities make decisions that have potentially large consequences for the global economy, almost exclusively based on domestic considerations. In the early 1980s, for instance, the focus of the debate was on the high interest rate policy pursued by Chairman Volcker to stem U.S. inflation, soon followed by the debt crisis in the developing world. In the 1990s, similar concerns were raised in relation to the monetary contraction in the United States which preceded the Mexican debt crisis. In the new millennium, the focus is on the consequences of the prolonged phase of U.S. monetary expansion (rather than contraction)—an expansion that many find excessive even from a purely U.S. domestic perspective. The specific question addressed by the paper is whether, among other things, low interest rates in the United States since 2004 fueled a commodity price boom. The transmission mechanism— from the expansionary monetary stance to oil prices—is best understood against a general context in which there are other, nonmonetary factors also at work. These are the factors that explain high rates of energy-intensive growth in emerging-market economies. Against a background feeding expectations of high prices for energy and commodities, low U.S. rates (i) may have provided “fertile ground for speculation,” if anything, by keeping the cost of holding inventories low; (ii) together with dollar depreciation, may have