A traditional function of the central bank is to control the price level. The fiscal theory of the price level challenges this assumption, arguing instead that the fiscal authority's budgetary policy is the primary determinant of the price level. The authors provide a critical review of the...

Inflation targeting has been adopted by many central banks, but not by the U.S. Federal Reserve. Using an estimated New Keynesian business cycle model, I perform counterfactual simulations to consider how history might have unfolded if the Federal Reserve had adopted a form of flexible inflation...

Central banks around the world potentially face a skeptical public when they announce a commitment to controlling inflation. Some economists have argued that, to enhance credibility, central banks should adopt monetary growth rules or other institutional arrangements. Yet it appears there are no...

After two decades of successfully restoring price stability in much of the world economy, central banks begin the next millennium facing a new set of challenges. One key task is how to conduct monetary policy in an era of price stability. Clearly, policymakers would like inflation to remain...

During Alan Greenspan’s years at the helm of the Federal Reserve System, the global economy has undergone significant structural change and withstood a variety of financial and economic shocks. In addition to helping steer the global economy through such challenges, Chairman Greenspan has been...

Over the past twenty years the world's major central banks have been largely successful at bringing inflation under control. While it is premature to suggest that inflation is no longer an issue of great concern, it is quite conceivable that the next battles facing central bankers will lie on a...

In a presentation at the Federal Reserve Banks of Kansas City's 2000 symposium, "Global Economic Integration: Opportunities and Challenges," Governor Brash of the Reserve Bank of New Zealand highlighted four issues related to global economic integration that affect central banks. First,...

Forecasts of future economic developments play an important role for the monetary policy decisions of central banks. For example, forecasts of goal variables can help central banks achieve their goals and make them more accountable to the public. There are two primary explanations for the...

This article provides an analytical framework for discussing the monetary responsibilities of a central bank. The framework shows how the central bank gives the price level a well-defined equilibrium value and how the central bank causes this equilibrium value to change over time.

The paper analyzes the need for financial regulations in the implementation of central bank policy. It emphasizes that a central bank serves two functions. Central banks function as monetary authorities, managing high-powered money to influence the price level and real activity; and they engage...