Sargent and Wallace (1981) have shown by an example, termed "spectacular", that a lowering of the growth rate of money may in some cases increase the rate of inflation - not only in the end, but even from the start. I show that this "spectacular" result ceases to hold if the central bank is...

This Occasional Paper provides an overview of the main challenges facing Hong Kong SAR as it continues to become more closely integrated with the mainland of China. Section I provides an overview of recent macroeconomic developments and the main policy issues in Hong Kong SAR. Section II...

This paper estimates the importance of the cost channel of monetary policy in a New Keynesian model of the business cycle. A model with nominal rigidities is extended by assuming that a fraction of firms need to borrow money to pay their wage bill. Hence, monetary policy tightenings increase...

Electronic money (e-money), as a network good, could become an important form of currency in the future. Such a development could affect monetary policy effectiveness. If an increased use of e-money substantially limits the demand for central bank reserves, this limitation would require changes...

The paper examines the effects of exchange rate fluctuations on real output and the price level in a sample of 33 developing countries. The theoretical model decomposes movements in the exchange rate into anticipated and unanticipated components. Unanticipated currency fluctuations help to...

One of the pioneers of inflation targeting (IT), the Bank of Canada is now considering a possibility of switching to price-level-path targeting (PLPT), where past deviations of inflation from the target would have to be offset in the future, bringing the price level back to a predetermined path....