Marvin Goodfriend's (2014) insightful, informative and provocative work explains concisely and convincingly why the Fed needs rules and boundaries. This paper reviews the broader institutional design problem regarding the effectiveness of the central bank in practice and confirms the need for...

The monetary policy of the ECB and the Fed over the past few years are compared and contrasted. The two central banks have similar price stability objectives and faced similar conditions early in the crisis, including the zero bound on short-term interest rates. Since mid-2012, their policies...

The United States financial system can be restructured by giving universal direct access to credit risk-free central bank money. In the 10 years since the financial crisis, technological advancements and regulatory tools have laid the foundation for Central Bank Digital Currencies to emerge as...

This paper uses a “trendy” approach to understand UK inflation dynamics. It focuses on the time series to isolate a low‐frequency and slow moving component of inflation (the trend) from deviations around this trend. We find that this slow‐moving trend explains a substantial share of UK...

Have bank regulatory policies and unconventional monetary policies — and any possible interactions — been a factor behind the recent “deglobalisation” in cross-border bank lending? To test this hypothesis, we use bank-level data from the UK — a country at the heart of the global...

The Federal Reserve's muddled mandate to attain simultaneously the incompatible goals of maximum employment and price stability invites short-term-oriented discretionary policymaking inconsistent with the systematic approach needed for monetary policy to contribute best to the economy over time....

A burgeoning part of the monetary policy design literature posits that optimal monetary policy is the solution to a constrained optimization problem where the monetary authority has the discretion to minimize a social welfare function, taking the economy and other policies as given. Davig and...

Interest coverage covenants, which set a maximum ratio of interest payments to earnings, are among the most popular provisions in firm debt contracts. For affected firms, the amount of additional debt that can be issued without violating these covenants is highly sensitive to interest rates....

The authors introduce a new methodology for determining the relative importance of fiscal and monetary policy to promote growth and stabilize inflation. They apply this methodology to a panel of data that spans 66 years and 17 countries. Their analysis shows that, on average, monetary policy is...

Monetary policy has fiscal implications that are especially pronounced at the zero lower bound. Independent central banks in advanced economies have considerable leeway to ease fiscal pressures faced by governments without compromising price stability. They also have the power to create...