Given the recurrence of the instability cycle and the higher probability of the economy to avoid falling into the liquidity trap if inflation is higher when a bubble bursts, then higher inflation is preferable. This paper suggests the monetary policy objective can be enhanced by shifting it from...

This paper employs stochastic simulations of the New Area-Wide Model - microfounded open-economy model developed at the ECB - to investigate the consequences of the zero lower bound on nominal interest rates for the evolution of risks to price stability in the euro area during the recent...

Under a conventional policy rule, a central bank adjusts its policy rate linearly according to the gap between inflation and its target, and the gap between output and its potential. Under the opportunistic approach to disinflation a central bank controls inflation aggressively when inflation is...

Based on a analysis’ model that postulates the existence of a systematic relationship between the price level and the stock of money, real output and nominal interest rate, the author examines the direction and magnitude of long-term "equilibrium" relationships in the Mexican economy over the...

We study a flexible price IS/LM economy in which the money supply and interest rate play the role of monetary policy instruments. If the central bank sets the nominal interest rate, the ambiguity in the price level is manifested. However, the equilibrium price level is permissible, if the...

A New Consensus in Macroeconomics (NCM) has emerged over the past couple of decades or so, which has become highly influential in terms of current thinking on the macroeconomy and of economic policy, especially monetary policy. Its main implication for economic policy has been the implementation...

The primary objective of Magyar Nemzeti Bank is to achieve and maintain price stability. The central bank of Hungary defines its 3 per cent inflation target in terms of the consumer price index. However, this indicator is quite volatile, and many of its components are sensitive to temporary...

The monetary and fiscal policy interactions have gained a new research interest after the 2008 crisis due to the global increase of fiscal debt. This paper constructs a macroeconomic model of joint fiscal and monetary policy for an emerging open economy taking into account its structural...

While the long-run relation between money and inflation as predicted by the quantity theory is well established, empirical studies of the short-run adjustment process have been inconclusive at best. The literature regarding the validity of the quantity theory within a given economy is mixed....

The issue of the financial crisis draws more and more the specialists’ attention. The monetary policy has a decisive role in monitoring and reducing the inflationary phenomenon as much as possible, since it can become a real danger for an economy during a period of crisis. Inflation is a...