I argue that it is useful to think about the optimal design of monetary institutions using the insights from the theory of incomplete contracts. The core of the monetary policy problem is the uncertainty about future social decisions resulting from the impossibility and the undesirability of...

We use a monetary overlapping-generations model to discuss the cause and durability of the marked fall in the volatility of inflation in recent decades. In our model, agents have to forecast inflation, and they do so using two "heuristics." One is based on lagged inflation, the other on an...

In 2009, demand in the world’s major economies fell, relative to its pre-crisis trend, by around US$2.5 trillion or 5% of GDP. The financial crisis damaged virtually every country. Global imbalances helped to fuel the financial crisis. And today they threaten the sustainability of the recovery...