Do the US Federal Reserve System Instruments Still Influence the Global Economy?

Abstract

The Federal Reserve System (Fed) of the United States is a strong economic organization that substantially affects economies worldwide. The Federal Reserve has many tools at its disposal, including monetary policy instruments, such as interest rate changes and quantitative easing, and regulatory functions, such as monitoring banks and fostering financial stability. This plays the role of setting the currency exchange rate in the financial market. However, as the interconnectedness and complexity of the global economy have increased, doubts have been raised by economists and policymakers concerning the efficacy of the Fed's tools in tackling the issues faced by the global economy (Fischer, 2015). In this thesis, the geo-economic consequences of the Fed's instruments are analyzed, and an investigation is conducted to determine whether these instruments are still effective in the present state of the global economy. Through a mixed methods literature review, which aims to discern and synthesize existing narratives on this topic, this thesis aims to provide a comprehensive understanding of the Federal Reserve's role in the global economy and the effectiveness of its instruments by analyzing the historical context of the Fed's instruments, an evaluation of their impact on the economies of the United States and the global economy, and an examination of current economic trends and challenges. This thesis seeks to contribute to ongoing discussions on the role of the Federal Reserve System through its policies, influence on the USD, and its effect on international economies.