At a speech before the Houston World Affairs Council Friday, The president of the U.S. Federal Reserve Bank of Dallas, Richard Fisher, hailed the effects of globalization on world economic growth, but said the worldwide nature of the economy now makes it harder to analyze. As VOA's Greg Flakus reports from Houston, Fisher said the knowledge economy is having a dramatic impact on productivity and helping keep inflation in check.

The task of the Federal Reserve Bank, known as the Fed, to control inflation and ward off recessions has been made more complicated by globalization, according to Richard Fisher. The President of the Dallas Fed says policymakers were once able to make decisions based on solely information about the domestic economy. Today, however, he says it is important to keep track of global trends and what impact they have on the domestic economy.

The problem, Fisher says, is that there are big parts of the global picture that are hard to see. "For central bankers, getting policy right will involve analyzing a great deal of additional data and overcoming blind spots about what is going on in key parts of the world. We don't, for example, know as much as we would like about China's capital stock, work hours and rural employment. We have no reliable estimates of the productive capacity in Brazil, India and Russia," he said.

In response to a VOA question after his speech, Fisher said that the Fed still has great power in terms of controlling inflation domestically, but that its economists must take into account many factors outside the United States in making their judgment calls on when to raise or lower interest rates. "The rest of the world, now a vigorous part of the capitalistic system, is also adding to our capacity. It is challenging the speed limits at which we might grow our economy, other economies and productivity worldwide," he said.

During his presentation here in Houston, Fisher also presented a report on globalizing the knowledge economy, which is contained in the 2006 annual report of the Federal Reserve Bank of Dallas. The essay examines 10 ways an integrated worldwide knowledge economy is affecting productivity and costs by, among other things, increasing foreign investment, creating new competition and broadening markets.

Richard Fisher acknowledges that some of the benefits of globalization come at a price, in terms of jobs lost in industries that have to adjust to new competition and the need to reduce costs. He says, however, that this so-called creative destruction has fostered innovation and increased productivity and that many new jobs are created in the process. He also notes that the U.S. economy, $13 trillion strong, is proof that the country can adapt to new challenges.