This paper argues that a central bank’s optimal policy in response to a cost-push shock depends upon its disclosure regime. More precisely, a credible central bank may find it optimal to implement an accommodative monetary policy in response to a positive cost-push shock whenever the...

The “sub-prime” crisis, which led to major turbulence in global financial markets beginning in mid-2007, has posed major challenges for monetary policymakers. We analyze the impact on monetary policy of the widening differential between policy rates and the three-month LIBOR rate, the...

This paper reviews Allan H. Meltzer’s A History of the Federal Reserve, Volume 2. This two-book volume covers Federal Reserve policies from 1951 to 1986. The book represents an enormous achievement in synthesizing a great amount of archival information into a historical account grounded on...

We estimate the path of inflation persistence in the United States over the last fifty years using an ARMA model of inflation with time-varying autoregressive parameter, motivated by the familiar New Keynesian framework. The estimated path of inflation persistence is consistent with a general...

We show how fan charts generated from Bayesian vector autoregression models can be useful for assessing (i) the effect of the zero-lower-bound constraint on forecasting uncertainty and (ii) the credibility of stress tests conducted to evaluate financial stability. To illustrate these issues, we...

The financial crisis has ignited a debate about the appropriate objectives and the governance structure of central banks. We use novel survey data to investigate the relation between these traits and banking system stability, focusing in particular on their role in micro-prudential supervision....

We examine policy rate recommendations of the Bank of Canada’s Governing Council (GC) and its shadow, the C.D. Howe Institute’s Monetary Policy Council (MPC). Individual recommendations of the MPC are observed but not those of the GC. Differences in the two committees’ recommendations are...

We challenge the widely held belief that New Keynesian models cannot predict optimal positive inflation rates. In fact, interest rates are justified by the Phelps argument that monetary financing can alleviate the burden of distortionary taxation. We obtain this result because, in contrast with...

A two-country general equilibrium model with large wage setters is developed to investigate the welfare implications of moving from a flexible exchange rate regime to a monetary union. The paper shows that the currency regime not only affects the central bank’s incentive to improve the terms...

Over the past few years, the Federal Reserve’s use of unconventional monetary policy tools has received a vast amount of public attention, from discussing how these asset purchases have put downward pressure on longer-term interest rates and thus supported economic activity to evaluating the...