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Anchors aweigh: how fiscal policy can undermine 'good' monetary policy
Policymakers have long understood that if fiscal policy runs amuck and monetary policy is forced to raise seigniorage revenues big inflations result. Latin American policymakers understand this outcome better than most. This message is implicit in Cagan’s (1956) initial study of hyperinflation and the ...
Trade exposure and the evolution of inflation dynamics
The Phillips curve—the relationship between price inflation
and fluctuations in economic activity— is a central building block
of economic models that allow for nominal rigidities and are relied
upon by central banks around the world to gauge cyclical inflationary
pressures and forecast inflation. ...
The passthrough of large-cost shocks in an inflationary economy
This paper surveys and modestly extends the theory of menu-cost
models of the behavior of the aggregate price level after large-cost
shocks. It does so in the context of an economy with a high underlying
rate of inflation. It concentrates on the effect of large permanent and
unexpected increases ...
Inflation targeting in financially stable economies: has it been flexible enough?
The international financial crisis and Great Recession of 2008- 09 called for a range of significant policy measures by central banks beyond aggressive interest rate cuts. Measures have ranged from improving international coordination to purchasing local private loan portfolios and direct intervention ...
The credit channel and monetary transmission in Brazil and Chile: a structured VAR approach
The widespread adoption of inflation-targeting regimes by emerging market economies has generated considerable interest in the channels through which monetary policy shocks affect output inflation and other relevant aggregates in such economies. Yet there is a paucity of empirical research for emerging ...
Sterilized foreign exchange interventions under inflation targeting
Inflation targeting needs exchange rate flexibility. If the policy interest rate is geared to achieving the inflation target the central bank must be willing to accept the resulting exchange rate. Simply put if the central bank has both an inflation target and an exchange rate target the private sector ...