US Federal Reserve Chairman Ben Bernanke on Monday rejected worries that the world's troubled large economies were competitively cutting their currency values and hurting smaller, healthier ones in the process.
Bernanke told an audience at the London School of Economics that, although the exchange rates of some major economies have fallen, the policies are aimed at boosting growth and "confer net benefits on the world economy as a whole."
Moreover, he said, because the main economies are all pumping up their money supplies -- effectively pushing down the value of their currencies -- the net change between their currencies is not very significant.
Do the strongly stimulative economic policies of countries like the United States, Britain, Japan and elsewhere "constitute competitive devaluations?", Bernanke asked rhetorically.
"To the contrary, because monetary policy is accommodative in the great majority of advanced industrial economies, one would not expect large and persistent changes in the configuration of exchange rates among these countries."
Bernanke's Fed has been the target of charges that ultra-low US interest rates and large "quantitative easing" programs which pump cheap money into the financial system are aimed at driving the dollar down in order to boost exports.
Japan, also with rates at the zero level and a huge stimulus program, has also been blamed.
The criticisms come mainly from countries with stronger economies which say they are both being swamped by inflows of money seeking higher returns and are finding it more difficult to export because their currencies are more expensive.
"I agree these challenges are significant" in emerging economies, Bernanke said, according to his prepared remarks.
However, he said, the trade-weighted real exchange rates of such countries are largely not different now than they were before the financial crisis erupted in 2008.
Moreover, even if they did lose advantage, the emerging economies would also reap benefits by the return to health of the large economies on the back of low interest rates.
The Fed's economic models, he said "suggest that the effects are roughly offsetting."
"A return to solid growth among the advanced economies is ultimately in the interest of advanced and emerging market economies alike."