Inflation in advanced economies is low by historical standards but there is no threat of deflation. Slower economic growth is caused by supply-side constraints rather than low inflation. Below-the-target inflation does not damage the reputation of central banks. Thus, central banks should not...

The research work presented below addresses the possible concern of central bank independence through the development and application of econometric models. The complexity of the modelling has allowed a step further in corroborating that financial independence is not only linked to the...

Many economists, including former Fed chairman Ben Bernanke, believe that the gold standard generates poor economic outcomes including output volatility, price instability, financial panics, the spread of recessions via the exchange rate, and speculation-induced collapse. These problems,...

It would be easy to say that central banks should consider asset prices as one of the objectives to avoid boom and bust cycles, as happened in the 2007-2009 crisis; the dotcom bubble of 2001; and the Japanese boom and bust of the 1980s and 1990s. However, its implementation would be theoretically...

In this paper bank bailout rules and central bank independence (CBI) are determined by majority voting. The failure of a bank is socially costly, since bailouts are financed by distortionary taxation. The tax distortion can be reduced via monetization, i.e. lowering CBI; but monetization causes...

This paper uses an online survey experiment to study how President Trump's criticism of the Federal Reserve may affect consumers' long-run inflation expectations, confidence in the Fed, and responsiveness to information about inflation. A random subset of respondents view one of President...

Should central banks increase their degree of transparency any further? We show that there is likely to be an optimal intermediate degree of central bank transparency. Up to this optimum more transparency is desirable: it improves the quality of private sector inflation forecasts. But beyond the...

We propose a new framework for monetary policy analysis to study monetary policy normalization when exiting a liquidity trap. The optimal combination of reserves and interest rate policy requires an increase in liquidity (reserves) a few quarters after the policy rate is set at the effective...