Central banks create money to lend during credit crunches, which might lead to inflation. We examine whether the two … to buy assets. This feature allows for lending of last resort without creating inflation. Our analysis also provides a … new rationale for the "Bagehot rule": High interest rates prevent inflation, rather than mitigate the risk of lending …

to solve these problems, we propose modifying the central bank's objective to (i) include state-contingent inflation … targets, (ii) target a measure of inflation that overweights non-tradable inflation …

to solve these problems, we propose modifying the central bank's objective to (i) include state-contingent inflation … targets, (ii) target a measure of inflation that overweights non-tradable inflation …