...This chapter explores the issues that need to be addressed in emerging-market countries to make inflation targeting work for them. It starts by outlining why emerging-market economies are so different from advanced economies and then discusses why developing strong fiscal, financial, and monetary...

...This chapter analyzes whether common currency countries—both dollarized and independent currency union countries—have outperformed countries that have a currency of their own. It shows that countries with no currency of their own have had significantly lower inflation and enjoyed higher growth...

...Inflation was a major concern during the three years that the book covers in extra detail. But the economics of inflation and the science of monetary and fiscal policy, especially in an emerging economy, are inadequately understood. The chapter provides a dissection of monetary policy including...

... societies. Joseph Tainter’s model of growing social complexity and declining marginal return on investments in complexity is examined and discussed in connection with equal opportunity, credential inflation, academic specialization, and the structure of educational systems. This extends and deepens...

...This chapter suggests that it is possible to make a study using distinct natural experiments on institutional arrangements of finance on the deflationary decade of the 1890s and the subsequent gold inflation decade of the 1900s. These natural experiments refer to the changes in regulations...

... for the treatment of government assets and the dynamics of net debt, as well as the methodological adjustments necessary to deal with foreign currency-denominated and inflation-indexed debt. Intertemporal budget constraint Interest rate–growth differential Debt dynamics Debt stabilizing primary fiscal balance...

.... The need for macroprudential supervision. 4. Dealing with bubbles – mopping up and after. 5. The lender of last resort and too big to fail. 6. The importance of the exchange rate for a small open economy. 7. The Eternal Verities: Lessons from the IMF. 8. Target inflation, flexibly. 9. “In a crisis, you do...

...This chapter is organized as follows. Section 2 begins with some forecasting terminology followed by preliminary details concerning the empirical analysis and the six prototype inflation forecasting models that will be used in Section 3 as a guide to the literature. Section 3 presents a survey...

...This chapter highlights some key areas where additional research could help to provide a still-firmer foundation for monetary policymaking. It briefly touches on four topics of particular interest for policymakers: 1) commodity prices and inflation; 2) the role of labor costs in the price-setting...

...Individuals who expect prices to increase can make the necessary adjustments with little, if any, cost. When price increases are unanticipated, however, they fail to adjust. Adjustment is more costly when increased inflation causes aggregate inflation and relative prices to be more variable...

... significantly less pronounced in the European Monetary Union (EMU). Within countries, a more countercyclical budgetary policy is positively associated with a higher level of financial development, a lower level of openness, and the adoption of an inflation targeting regime. A more countercyclical budgetary...

... Board (WACB) in 1912. It shows that during a period of pronounced global monetary instability, the early currency boards achieved low average inflation rates under a credibly pegged exchange rate regime. Sulling Anne Convertibility Early currency boards Hanke Steven Schenk C Schuler K Frankel...

...This chapter reviews evidence on the benefits and costs of currency boards. It first considers the behavior of inflation, money growth, and interest rates under various exchange rate regimes. It then turns to the “real” side of the economy—exports, investment, and output growth. Next it examines...

...This chapter considers the possibility that the strong inflation and growth performance of euro currency boards may be due to outside factors common to all the transition economies of central Europe, with the boards playing only a minor role. It does so by placing the experience of the euro boards...

...The chapter shows that existence of a unique Rational Expectations equilibrium can be ensured even if the Taylor Principle – stating that the policy interest rate increases by more than the increase in the expected rate of inflation – does not hold. This is shown by extending a barebones' central...

... of Israel’s high-inflation crisis and the long period where it rebuilt the major financial, and monetary institutions, and regulatory bodies. These elements provided better macroeconomic stability and help mitigate business cycle fluctuations, and get the economy through military conflicts and boycotts...

...In 1958, economist A. W. Phillips published an article describing what he observed to be the inverse relationship between inflation and unemployment; subsequently, the “Phillips curve” became a central concept in macroeconomic analysis and policymaking. But today’s Phillips curve is not the same...

... directly and re-establishing monetary policy transmission, such measures enhance the effectiveness of the standard interest rate policy instrument and thus serve to achieve macro-stabilisation without inducing greater interest rate volatility; (b) a solid anchoring of inflation expectations stemming from...

...This chapter begins with an intellectual history of the Phillips curve. It then provides a summary of the revised conference papers and comments presented during the Federal Reserve Bank of Boston’s June 2008 conference, “Understanding Inflation and the Implications for Monetary Policy: A Phillips...

...This chapter traces how the treatment of inflation expectations in the Phillips curve framework has evolved over time. The discussion includes the New Keynesian Phillips curve, inflation-determination without a Phillips curve, and new ideas about modeling the effects of uncertainty and inertia. Two...