Governing the Float: Credibility and the U.S. Dollar

Ori Tamir, University of Michigan, Ann Arbor

This paper argues that floating exchange rates constitute a mode of governance rather than the absence of one. Drawing on archival transcripts of the U.S. Federal Reserve’s Federal Open Market Committee from 1973 to the mid-1990s, it shows how exchange-rate governance persisted following the collapse of Bretton Woods, initially through discretionary interventions justified by a distinction between market “psychology” and economic “fundamentals.” As monetary governance was reorganized around credibility and expectations, however, intervention became increasingly incoherent within the Federal Reserve’s governing logic. The dollar was progressively redefined from an object of management into a signal through which policy consistency and credibility were assessed. In doing so, the paper extends economic sociological accounts of governing through markets, demonstrating how central bank authority operates through signals and restraint, rather than direct price control.

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 Presented in Session 27. Financial Stability and the Dollar