Japan has experienced stagnation, deflation, and low interest rates for decades. It is caught in a liquidity trap. This paper examines Japan’s liquidity trap in light of the structure and performance of the country’s economy since the onset of stagnation. It also analyzes the country’s...

The recent global financial crisis has led central banks to rely heavily on "unconventional" monetary policies. This alternative approach to policy has generated much discussion and a heated and at times confusing debate. The debate has been complicated by the use of different definitions and...

We explore the effectiveness and balance of benefits and costs of so-called "unconventional" monetary policy measures extensively implemented in the wake of the financial crisis: balance sheet policies (commonly termed "quantitative easing"), forward guidance and negative policy rates. Our...

We examine the conduct of monetary policy in a world where the supply of outside money is controlled by the fiscal authority-a scenario increasingly relevant for many developed economies today. Central bank control over the long-run inflation rate depends on whether fiscal policy is Ricardian or...

The recent global financial crisis has led central banks to rely heavily on "unconventional" monetary policies. This alternative approach to policy has generated much discussion and a heated and at times confusing debate. The debate has been complicated by the use of different definitions and...

Modern Money Theory (MMT) has generated considerable scrutiny and discussions over the past decade. While it has gained some acceptance in the financial sector and among some politicians, it has come under strong criticisms from all sides of the academic spectrum and from conservative political...

We review macroeconomic performance over the period since the Global Financial Crisis and the challenges in the pursuit of the Federal Reserve's dual mandate. We characterize the use of forward guidance and balance sheet policies after the federal funds rate reached the effective lower bound. We...

Central banks have usually employed short-term rates as the main instrument of monetary policy. In the last decades, however, forward guidance has also become a central tool for monetary policy. In an innovative way this paper combines two sources of extraneous information - high frequency...

After decades using monetary aggregates as the main instrument of monetary policy and having different varieties of crawling peg exchange rate regimes, Colombia adopted a full-fledged inflation-targeting (IT) regime in 1999, with inflation as the nominal anchor, a floating exchange rate, and the...

Standard models used for monetary policy analysis rely on sticky prices. Recently, the literature started to explore also nominal debt contracts. Focusing on mortgages, this paper compares the two channels of transmission within a common framework. The sticky price channel is dominant when...