Following the experience of the global financial crisis, central banks have been asked to undertake unprecedented responsibilities. Governments and the public appear to have high expectations that monetary policy can provide solutions to problems that do not necessarily fit in the realm of...

We explore the links between credit expansion, inflation, and inflation expectations, and show that active public debt management can trigger a non-interest rate channel of credit expansion. This creates incentives for the government to use debt management for promoting non-debt management...

The paper describes the monetary and fiscal policy frameworks in Sweden and analyses how they were established as well as current challenges. Sweden provides a good example of how deep economic crisis, in interaction with independent thinking by academics and other experts as well as policy...

Thanks to the Maastricht Treaty and similar arrangements, central banks nowadays enjoy considerable independence. This is generally believed to be the result of relatively recent debates, which led to the conclusion that sheltering monetary authorities from the pressures of fiscal policymakers...

This paper argues that the loose monetary policy of two of the world’s most important financial institutions-the US Federal Reserve Board and the European Central Bank-were ultimately responsible for the outburst of global financial crisis of 2008 - 09. Unusually low interest rates in 2001 -...

The worldwide financial crisis revealed that some of the basic consensuses concerning the macroeconomic policy framework and the roles of the central banks were no longer tenable. This prompted rethinking of central bank objectives, strategies and policy instruments, with particular focus on the...

After the colossal financial crisis of 2008, many monetary policy analyses have shown the profound implications for financial stability of monetary policy in a liquidity trap. This paper investigates how monetary policy in a liquidity trap affects financial stability in a New Keynesian model...

Standard New Keynesian models predict implausibly large and favorable responses of inflation and output to expansionary forward guidance on interest rates. We find that the introduction of permanent or recurring active fiscal policy dampens the response of output and inflation to forward...

Standard models predict implausible responses to forward guidance announcements when interest rates are pegged (the ``forward guidance puzzle"). This paper develops conditions for regime-switching models to exhibit a forward guidance puzzle, and shows when the fiscal theory of the price level...

This Policy Analysis explains the antecedents of the current global financial crisis and critically examines the reasoning behind the U.S. Treasury and Federal Reserve's actions to prop up the financial sector. It argues that recovery from the financial crisis is likely to be slow with or...