Many emerging market economies have a higher tolerance for inflation than industrialized economies. Recent empirical studies find nonlinear effects of inflation and that the threshold rate is higher for emerging countries. Motivated by the fact that emerging countries have higher business costs,...

Many commentators have argued that if the Federal Reserve had followed a stricter monetary policy earlier this decade when the housing bubble was forming, and if Congress had not deregulated banking but had imposed tighter financial standards, the housing boom and bust - and the subsequent...

This monograph challenges the myth that the recent banking crisis was caused by insufficient statutory regulation of financial markets. Though it finds that statutory regulation failed, and that market participants took more risks than they should have done, it appears that statutory regulation...

The analysis in this paper was presented to the Federal Open Market Committee as background for its discussion of the Federal Reserve's review of monetary policy strategy, tools, and communication practices. The Committee discussed issues related to the review at five consecutive meetings from...

We review the macroeconomic performance during the Global Financial Crisis and subsequent economic expansion, as well as the challenges in the pursuit of the Federal Reserve's dual mandate. We characterize the use of forward guidance and balance sheet policies after the federal funds rate...

Beginning with the global financial crisis (2008) the correlation between crude oil prices and medium-term and forward inflation expectations increased leading to fears of their un-anchoring. Using the first principal component of commodity prices as a measure for global aggregate demand, we...

We review macroeconomic performance over the period since the Global Financial Crisis and the challenges in the pursuit of the Federal Reserve’s dual mandate. We characterize the use of forward guidance and balance sheet policies after the federal funds rate reached the effective lower bound....

We review the experience of central banks in 12 advanced economies in formulating their price stability objectives during the last 20 years. All central banks under review target a small and positive inflation rate (typically 2%). In most cases, they set a point target, in some a range or a...

We test the quantity theory of money (QTM) using a novel approach and a large new sample. We do not follow the usual approach of first differentiating the logarithm of the Cambridge equation to obtain an equation relating the growth rate of real GDP, the growth rate of money and inflation. These...

Empirical studies of the "shoe-leather" costs of inflation are typically computed using M1 as a measure of money. Yet, official data on M1 includes all currency issued, regardless of the country of residence of the holder. Using monetary data adjusted for US dollars abroad, we show that the...