$ 500 billion to $ 1 trillion. such a massive reallocation would, of course, have resulted in an appreciating euro and depreciating dollar in the early stages of monetary union. we now know that, at least in this initial period, rapid portfolio reallocation does not seem to have occurred and the euro ’ s exchange value relative to the dollar has moved exactly contrary to what some had predicted. the macroeconomic factors — the outlook for growth and interest rates — so far have dominated the new currency ’ s movements, just as macroeconomic factors were the driving force behind movements in the euro ’ s chief predecessor currency, the german mark. but the absence of dramatic near - term consequences should not lead us to conclude that this bold adventure will have negligible consequences for the euro area, for the global economy or for the united states. rather it should remind us that the consequences of the euro for international financial relationships are likely to evolve over some considerable period of time. the consequences might include a more competitive and healthy euro - wide economy, a greater role for the euro as an international currency, a growing role for euro - denominated assets in global portfolios more generally, and changes in the global pattern of exchange rates and current account balances. for example, if economic policies in europe are sound, the dollar ’ s international status would likely diminish somewhat and the euro ’ s international status would increase, reflecting the prosperity of the euro - area economy and its role in the global marketplace. the international status of a currency involves a number of different functions that correspond generally to the classic uses of money as a unit of account, a means of payment, and a store of value. since the end of the second world war, the dollar has been preeminent in the global financial system in terms of the currency in which contracts are denominated and paid, official reserves are held, and financial instruments are issued. but, just as the german mark increased in international importance and eroded slightly the dollar ’ s status, so is the euro likely to continue this trend. inertia and so - called network externalities are key to explaining why a shift away from the dollar would not occur overnight. inertia probably explains why it is that until relatively recently a number of traded commodities were quoted and priced in sterling. if the dollar is used in enough different ways in the international arena, then it is cheaper to use the dollar rather than some alternative — i

richard h clarida : us economic outlook and monetary policy speech by mr richard h clarida, vice chairman of the board of governors of the federal reserve system, at the 35th annual nabe economic policy conference & quot ; promoting global growth and domestic economic security & quot ;, washington dc, 28 february 2019. * * * thank you for the opportunity to participate in the 35th annual economic policy conference of the national association for business economics. before we begin our conversation, i want to share a few thoughts about the outlook for the economy and monetary policy. 1 current economic situation and outlook the u. s. economy expanded at a robust pace in 2018, and my baseline outlook for 2019 foresees somewhat slower but still - solid growth in the year ahead. in july, just about four months from now, the current economic expansion will become the longest on record. the federal reserve is charged by the congress with achieving and sustaining a dual mandate of maximum employment and price stability, and the economy is as close as it has been in many years to meeting these goals. the unemployment rate is near the lowest level recorded in 50 years, and average monthly job gains have continued to well outpace the increases needed over the longer run to provide jobs for new entrants to the labor force. most measures of nominal wage growth are running at or somewhat above the 3 percent pace, and recent wage gains have been strongest for lowerskilled workers. moreover, the strength of the labor market appears to have encouraged people to join the labor force and others, who might have left it, to continue working. the labor force participation rate - the share of people who are either working or looking for work - - has moved up 1 / 2 percentage point over the past year, and the participation rate of prime - age workers ( those 25 to 54 years old ) has risen about 1 - 1 / 2 percentage points over the past few years. inflation, as measured by the 12 - month change in the price index for personal consumption expenditures ( pce ), is estimated to have been a little bit below 2 percent of late, largely because of recent declines in energy prices. however, core pce inflation, which excludes food and energy prices and tends to be a better indicator of future inflation, is estimated to have been about 2 percent. market - based measures of inflation compensation have moved lower, on net, since last summer, though they have increased some recently, and some survey - based measures of longer