minimize the length and severity of the recession, would require a stronger commitment to low interest rates for an extended …

This paper assumes that a central bank commits itself to maintaining an inflation target and then asks what measure of … the inflation rate the central bank should use if it wants to maximize economic stability. The paper first formalizes this … that a central bank that wants to achieve maximum stability of economic activity should use a price index that gives …

style of central banking affects central banks' solvency. A central bank is insolvent if its requirement to pay dividends to … Bank), and exchange-rate risk (central banks of small open economies). We find that a central bank that pays dividends … circumstances, the dividend will be negative, meaning that the government is making a payment to the bank. If the charter does not …

What set of institutions can support the activity of a central bank? Designing a central bank requires specifying its … objective function, including the bank's mandate at different horizons and the choice of banker(s), specifying the resource … constraint that limits the resources that the central bank generates, the assets it holds, or the payments on its liabilities …

In spite of the mystique behind a central bank's balance sheet, its resource constraint bounds the dividends it can … multiple equilibria arise if debt repudiation lowers fiscal surpluses, the central bank may help to select one equilibrium. The … central bank's main lever over fundamentals is to raise inflation, but otherwise the balance sheet gives it little leeway …