We compare the performance of a currency board, inflation targeting, and dollarization in a small, open developing … matches the second moments of key variables well. Welfare analysis suggests that dollarization is preferable to alternative … regimes because it removes currency premium volatility. However, a currency board can match dollarization on welfare grounds …

In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating … index in markets with financial frictions. We find that, in the presence of financial frictions, a welfare …-maximizing central bank should adopt flexible headline inflation targeting a target for headline CPI inflation with some weight on the …

This paper proposes a quantitative assessment of the welfare effects arising from the Common Monetary Area (CMA) and an …

different issue: the relationship between inflation and welfare. The literature is surveyed and a model is developed. A key … conclusion is that an increase in inflation targets gives rise to additional welfare costs, even after the extra room to maneuver … additional welfare costs of raising inflation targets from 2 to 4 percent are estimated at about 0.3 percent of annual real …

We examine whether changes in the distribution of household inflation expectations contain information on future … inflation. We first discuss recent shifts in micro data from the US, UK, Germany, and Canada. We then zoom in on the US to … explore econometrically whether distributional characteristics help predict future inflation. We find that the shape of the …

The surge in energy prices in 2022 has been a defining factor behind the increase in euro area inflation. We assess the … to mute the effects of the increase in energy prices and to lower inflation. Overall, we find that these unconventional … measures reduced euro area inflation by 1 to 2 percentage points in 2022 and may avoid an undershoot later on. When …

In this paper, we examine how economic shocks affect the distribution of household inflation expectations. We show that … the dynamics of households' expected inflation distributions are driven by three distinctive functional shocks, which … influence the expected inflation distribution through disagreement, level shift and ambiguity. Linking these functional shocks …

The consensus among central bankers is that higher inflation expectations can drive up inflation today, requiring … tighter policy. We assess this by devising a novel method for identifying shocks to inflation expectations, estimating a semi … data for the United States, we find that a positive inflation expectations shock is deflationary and contractionary …

This paper identifies and quantifies the drivers of inflation dynamics in the three Baltic economies and assesses the … effectiveness of fiscal policy in fighting inflation. It also analyzes the macroeconomic impact of inflation on competitiveness by … focusing on the relationship between wages and productivity in the tradeable sector. The results reveal that inflation in the …

Central banks in major industrialized economies were slow to react to the surge in inflation that began in early 2021 … war in Ukraine. We investigate the consequences of policy delay in responding to inflation shocks. First, using a simple … three-period model, we show how policy delay worsens inflation outcomes, but can mitigate or even reverse the output decline …