The fiscal theory of the price level can describe monetary policy. Governments can set interest rate targets and thereby affect inflation, with no change in fiscal surpluses. The same basic mechanism describes interest rate targets, forward guidance, open market operations, and quantitative...

We propose a method for indentifying discretionary fiscal policy with real time data. The starting point is the observation that automatic stabilizers should depend on true GDP, while discretionary fiscal policy depends on the information that policy makers have in real time. We approximate the...

A joint model of macroeconomic and term structure dynamics is specified and estimated for the euro area. The model comprises a backward-looking Phillips curve, a dynamic IS equation, a monetary policy rule as well as a specification of the dynamics of trend growth and the natural real interest...

Central banks in the developed world are being misled into fighting the perceived dangers of a ‘deflationary spiral' because they are looking at only one indicator: consumer prices.This Policy Brief finds that while consumer prices are flat, broader price indices do not show any sign of...

Financial intermediation and bank spreads are important elements in the analysis of business cycle transmission and monetary policy. We present a simple framework that introduces lending relationships, a relevant feature of financial intermediation that has been so far neglected in the monetary...

Academic economists have perennially made arguments for the conduct of monetary policy constrained by an explicit rule. These arguments have gone nowhere. This paper advances a proposal to clarify Fed objectives and strategy in order to facilitate discussion leading to consensus over a desirable...

This article provides an estimation of inflation aversion and cycles on the part of the Banco de la República (Colombia's central bank) for the period 1994-2005, using a space-state structure and the Kalman Filter method. It shows that the parameter that measures aversion to the product gap is...