In practice, central banks have been confronted with a trade-off between stabilising inflation and output when dealing with rising oil prices. This contrasts with the result in the standard New Keynesian model that ensuring complete price stability is the optimal thing to do, even when an oil...

This paper highlights relative price adjustments taking place in the global economy as important sources of the lower levels of inflation rates observed in the recent decades. Using a markup model, it shows substantial effects from declines in wage costs and import prices relative to consumer...

Few areas of monetary economics have been studied as extensively as the transmission mechanism. The literature on this topic has evolved substantially over the years, following the waxing and waning of conceptual frameworks and the changing characteristics of the financial system. In this paper,...

Despite constituting the very heart of the monetary transmission mechanism, widespread misconceptions still exist regarding how monetary policy is implemented. This paper highlights the key misconceptions in this regard and shows how they have compromised the understanding of important aspects...

In the economic environment that has been emerging over the last couple of decades, it is more likely that the occasional build-up of financial imbalances, typically in the form of unsustainable credit and asset price booms, will occur against the background of low and stable inflation, posing a...

Recent financial instability has called into question the sufficiency of low inflation as a goal for monetary policy. This paper discusses interwar literature bearing on this question. It begins with theories of the cycle based on the quantity theory, and their policy prescription of price...

This paper studies the relationship between macroeconomic behaviour and the monetary policy regime in Hong Kong and Singapore, using data for 1984-2004. We estimate an econometric model, comprising a Phillips curve, an IS curve and an equation for changes in the nominal effective exchange rate...

This paper identifies the similarities and differences in the balance sheets of the household and business sectors in 14 industrialised countries with a view to identifying their implications for the transmission mechanism of monetary policy. The analysis draws on the central bank responses to a...

Since the Great Financial Crisis, central banks have been facing a triple challenge: economic, intellectual and institutional. The institutional challenge is that central bank independence - a valuable institution - has come in for greater criticism. This essay takes a historical perspective and...