This paper models inflation by combining the multi-country framework of one of its authors (Forbes) with the nonlinear specification proposed by the other two (Gagnon and Collins). The results find strong support for a Phillips curve that becomes nonlinear when inflation is low, in which case...

Over the past 10 years, central banks and governments throughout the developing world have accumulated foreign exchange reserves and other official assets at an unprecedented rate. This paper shows that this official asset accumulation has driven a substantial portion of the recent large global...

Official purchases of foreign assets -- a broad definition of currency intervention -- are strongly correlated with current account (trade) imbalances. Causality runs in both directions, but statistical analysis using instrumental variables reveals that the effect of official asset purchases on...

This paper shows that the scope for bond yields to fall below zero is strictly limited by market expectations about how far below zero central banks are willing to set their short-term policy rates. If a central bank communicates a credible commitment to keeping its policy rate above a given...

This paper examines the effects of border-adjusted consumption taxes (mainly value added taxes or VATs) in a sample of 34 advanced economies from 1970 through 2015. We find that the real exchange rate tends to rise by the full amount of any consumption tax increase, with little effect on the...

The Phillips curve, which traces out a negative relationship between inflation and unemployment, has undergone tremendous changes over more than 100 years. Some researchers argue that the slope of the curve in the United States fell substantially around 20 years ago so that unemployment now has...

We use a cross-country panel framework to analyze the effect of net official flows (chiefly foreign exchange intervention) on current accounts. We find that net official flows have a large but plausible effect on current account balances. The estimated effects are larger with instrumental...

This paper examines the extent to which government policies are responsible for the pattern of current account (trade) imbalances and, by implication, the extent to which such policies might be used to achieve the G-20 goal of reducing imbalances. Fiscal balances and foreign exchange...

A 2017 analysis found that fiscal balances and foreign exchange intervention are the most important observable factors behind differences in current account balances across countries and over time (Gagnon 2017). This paper updates that analysis with three more years (2016–18) and roughly 40...

This paper revises and extends PIIE Working Paper 20-6. It continues to find strong support for a Phillips curve that becomes nonlinear when inflation is “low”—which our baseline model defines as less than 3 percent. The nonlinear curve is steep when output is above potential (slack is...