In closed or open economy models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We analyze this result in the context of developing economies, where a large proportion of households are credit constrained...

This paper provides estimates of the government spending multiplier over the monetary policy cycle. We identify government spending shocks as forecast errors of the growth rate of government spending from the Survey of Professional Forecasters (SPF) and from the Greenbook record. The state of...

The Fed has taken several steps towards strengthening its monetary framework over the past several years. Those steps have supported the Fed's efforts to stimulate the economy through forward guidance despite being constrained by having policy rates at zero. We show that an optimal control...

Countries with evolving monetary regimes that decide to embark on "the Journey to inflation targeting" may not be able to adopt a full-fledged inflation targeting regime immediately. Those countries would be better off adopting transitional arrangements that take advantage of the informational...

This paper presents a novel approach to detail the propagation of shocks to public debt. The modeling technique involves a structural vector auto-regression (SVAR) estimator with an endogenous debt accumulation equation. It explores how the main drivers of sovereign debt dynamics-the primary...

This paper develops a model featuring both a macroeconomic and a financial friction that speaks to the interaction between monetary and macro-prudential policies. There are two main results. First, real interest rate rigidities in a monopolistic banking system have an asymmetric impact on...

We introduce time-varying systemic risk in an otherwise standard New-Keynesian model to study whether a simple leaning-against-the-wind policy can reduce systemic risk and improve welfare. We find that an unexpected increase in policy rates reduces output, inflation, and asset prices without...

Monetary policy implementation in a federal country requires both vertical (national and subnational governments) and horizontal (between subnational jurisdictions) institutional coordination. The optimal centralized monetary policy is blind and potentially nonheterogeneous at the subnational...