Expansionary fiscal policies have increased significantly following the subprime crisis in 2007 and the COVID-19 crisis, leading to fiscal dominance concerns, where a growing share of monetary authorities may be forced to deviate from policy targets to accommodate fiscal policies. Meanwhile,...

This paper examines what strategies policymakers have used to both reduce and control inflation. It first outlines why a consensus has emerged that inflation needs to be controlled. Then it examines four basic strategies: exchange rate pegging, monetary targeting, inflation targeting, and the...

This paper reviews a substantial range of empirical evidence on whether the Phillips curve is dead, i.e. that its slope has flattened to zero. National data going back to the 1950s and 60s yield strong evidence of negative slopes and significant nonlinearity in those slopes, with slopes much...

This paper first outlines the key stylized facts about changes in inflation dynamics in recent years: 1) inflation persistence has declined, 2) the Phillips curve has flattened, and 3) inflation has become less responsive to other shocks. These changes in inflation dynamics are interpreted as...

Countries have increased significantly their public-sector borrowing since the Global Financial Crisis. In this context, we document several potential fiscal dominance effects during 2000-2017 under Inflation Targeting (IT), and non-IT regimes. Higher ratios of public debt-to-GDP are associated...

As a share of GDP, the U.S. Federal debt held by the public exceeds 50 percent in FY2009, the highest debt ratio since 1955. Projections indicate the debt ratio may be in the 70-100 percent range within ten years. In many respects, the temptation to inflate away some of this debt burden is...

In this paper we examine how target ranges work in the context of a Barro-Gordon (1983) type model, in which the time-inconsistency problem stems from political pressures from the government. We show that target ranges turn out to be an excellent way to cope with the time-inconsistency problem,...

We investigate why and how the financial conditions of developing and emerging market countries (peripheral countries) can be affected by the movements in the center economies - the U.S., Japan, the Eurozone, and China. We apply a two-step approach. First, we estimate the sensitivity of...

This paper investigates the potential impacts of the degree of divergence in open macroeconomic policies in the context of the trilemma hypothesis. Using an index that measures the relative policy divergence among the three trilemma policy choices, namely monetary independence, exchange rate...

Developing countries have typically pursued procyclical macroeconomic policies, which tend to amplify the underlying business cycle (the "when-it-rains-it-pours" phenomenon). There is, however, evidence to suggest that about a third of developing countries have shifted from procyclical to...