TL;DRAbstract
The Asia crisis made raising the funds rate difficult because a stronger dollar would have put additional pressure on Asian currencies already weakened by capital outflows. In the absence of rising inflation, nothing offset the pressure to keep interest rates down. From fall 1997 through the first half of 1999, the FOMC departed from its policy rule of raising the funds rate when output growth above trend tightened labor markets. Commentators applauded Greenspan for allowing job creation. However, bust followed boom, and job destruction followed job creation.
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The Asia crisis made raising the funds rate difficult because a stronger dollar would have put additional pressure on Asian currencies already weakened by capital outflows. In the absence of rising inflation, nothing offset the pressure to keep interest rates down. From fall 1997 through the first half of 1999, the FOMC departed from its policy rule of raising the funds rate when output growth above trend tightened labor markets. Commentators applauded Greenspan for allowing job creation. However, bust followed boom, and job destruction followed job creation.
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