This Selected Issues Paper on Iran reviews that monetary factors are the main determinants of inflation in the country. Government spending out of oil revenues leads to large liquidity injections that the central bank accommodates owing to its efforts to prevent a significant nominal...

In an attempt to clean up an unruly literature, we specify the necessary and sufficient conditions for household optimality in a model where money is the only …financial asset and provide the relevant proofs. We use our results to analyse when de‡flationary bubbles can and cannot exist. Our...

Is it beneficial for a country's currency to be used internationally? And, if so, can we quantify the benefit? Since the emergence of the euro, there has been great interest in the consequences of a transfer of the US dollar's premier international role to the euro. Building on recent...

Many countries in the Middle East and North Africa (MENA) region have recently experienced surges in money growth that apparently have not generated significant inflationary pressures. Moreover, several MENA countries have followed monetary policy rules that according to standard monetary theory...

This paper provides comprehensive empirical evidence that supports the predictions of Sargent and Wallace's (1981) "unpleasant monetarist arithmetic" that an increase in public debt is typically inflationary in countries with large public debt. Drawing on an extensive panel dataset, we find that...

This paper draws attention to inconsistencies in estimating simple monetary policy rules and their implications for policy advice. We simulate a macroeconomic model with a backward reaction function similar to Taylor (1993). We estimate different versions of a policy rule, using these simulated...

Over the past two years, the IMF staff has been developing a new multicountry macroeconomic model called the Global Economy Model (GEM). This paper explains why such a model is needed, how GEM differs from its predecessor model, and how the new features of the model can improve the IMF’s...

Extending recent theoretical contributions on sources of inflation inertia, we argue that monetary uncertainty accounts for sluggish expectations adjustment to nominal disturbances. Estimating a model in which rational individuals learn over time about shifts in U.S. monetary policy and the...