The first part of the paper analyzes the inflationary risks associated with price liberalization, the welfare costs of inflation and the difficulties of East European central banks in pursuing non-inflationary policies. The main obstacles are the low credibility of stabilization policies and a...

Some central banks have a reputation for being secretive. A justification for this behaviour that we find in the literature is that being transparent about operations and beliefs hinders the central bank in achieving the best outcome. In other words, a central bank needs flexibility and...

It is well known that if international linkages are relatively small, the potential gains to international monetary policy coordination are typically quite limited. What if, however, goods and financial markets are tightly linked? Is it then problematic if countries unilaterally design their...

OBJECTIVES AND MOTIVATION: This paper considers the impact of interactions between fiscal policy and monetary institutions in the presence of unionized labour markets on economic outcomes and welfare in the long run. Two main classes of questions are investigated. First, what is the impact of...

We study the interplay between competition and trust as efficiency-enhancing mechanims in the private provision of money. With commitment, trust is automatically achieved and competition ensures efficiency. Without commitment, competition plays no role. Trust does play a role but requires a...

We study how competition from privately-supplied currency substitutes affects monetary equilibria. Whenever currency is inefficiently provided, inside money competition plays a disciplinary role by providing an upper bound on equilibrium inflation rates. Furthermore, if ‘inside monies’ can...

I consider some of the leading arguments for assigning an important role to tracking the growth of monetary aggregates when making decisions about monetary policy. First, I consider whether ignoring money means returning to the conceptual framework that allowed the high inflation of the 1970s....

Arguments for a prominent role for attention to the growth rate of monetary aggregates in the conduct of monetary policy are often based on references to low-frequency reduced-form relationships between money growth and inflation. The 'two-pillar Phillips curve' proposed by Gerlach (2004) has...

The paper first reviews the budget identities of the fiscal and monetary authorities and the solvency constraint or present value budget constraint of the consolidated public sector, for both closed and open economies. It then discusses the new conventional wisdom concerning the fiscal roots of...

Monetary theory and policy are part of intertemporal public finance. This Paper reviews some interesting recent developments. The two ghosts are the venerable liquidity trap and the Pigou effect or real balance effect. The eccentricities are negative nominal interest rates and the helicopter...