Will the US inflate away its public debt?

Ricardo Reis, Jens Hilscher, Alon Raviv 07 August 2014

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Should the US Federal Reserve raise the inflation target from its current level of 2%? And will it? One benefit would be to make hitting the zero lower bound less likely, which would lead to less severe recessions, as Olivier Blanchard, Giovanni Dell’Ariccia, and Paolo Mauro (2010), Daniel Leigh (2010), and Laurence Ball (2013) have argued on this website.

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Topics:  Macroeconomic policy

Tags:  inflation, monetary policy, public debt, seignorage

What are the macroeconomic effects of asset purchases?

Martin Weale, Tomasz Wieladek 10 June 2014

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After policy rates fell close to zero in response to the global financial crisis of 2008-09, the scope for further conventional monetary policy easing was exhausted. As a result, both the Bank of England and the Federal Reserve embarked on large-scale asset purchases of government and financial securities (see Figures 1 and 2).

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Topics:  Monetary policy

Tags:  inflation, Federal Reserve, Phillips curve, Bank of England, quantitative easing, unconventional monetary policy, output

Disagreement about inflation expectations: The case of Japanese households

Shusaku Nishiguchi, Jouchi Nakajima, Kei Imakubo 02 May 2014

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It is well known that inflation expectations vary across agents. Nevertheless, this fact has attracted little attention. Analysis of inflation expectations typically tend to focus on measures such as the mean and the median of such expectations. One of the distinguished exceptions is Mankiw et al. (2003), who discuss in a context of sticky information how the disagreement in US households' inflation expectations was evolving through the Volcker disinflation. Our recent research (Nishiguchi et al. 2014) has brought the disagreement issue once again to the fore.

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Topics:  Monetary policy

Tags:  inflation, Japan, inflation expectations

Is the Phillips curve alive and well after all? Inflation expectations and the missing disinflation

Olivier Coibion, Yuriy Gorodnichenko 15 November 2013

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“Prior to the recent deep worldwide recession, macroeconomists of all schools took a negative relation between slack and declining inflation as an axiom. Few seem to have awakened to the recent experience as a contradiction to the axiom.” (Bob Hall, 2013.)

“The surprise [about inflation] is that it’s fallen so little, given the depth and duration of the recent downturn. Based on the experience of past severe recessions, I would have expected inflation to fall by twice as much as it has.” (John Williams, 2010.)

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Topics:  Global crisis Monetary policy

Tags:  inflation, Phillips curve, expectations, oil, global crisis, disinflation, Great Recession

Independent monetary policies, synchronised outcomes

Espen Henriksen, Finn Kydland, Roman Šustek 02 October 2013

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The recession in the Eurozone has given new life to optimal-currency-area thinking. The argument goes that the disadvantages of a single currency come from the loss of flexibility and ability to use monetary policy to respond to “asymmetric shocks” (Krugman and Obstfeld 2009). The often-unarticulated presumption is that countries with independent monetary policies would make different policy decisions as long as contemporaneous shocks to output and employment were asymmetric.

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Topics:  Exchange rates Monetary policy

Tags:  inflation, monetary policy, EMU, Central Banks, capital controls, exchange-rate policy

Why is housing such a popular investment? A new psychological explanation

Thomas Alexander Stephens, Jean-Robert Tyran 23 November 2012

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In the wake of the economic crisis that began in 2007, homeowners in many countries have faced substantial losses. Prices have fallen in both nominal and real terms. In the US, for example, house prices in the first quarter of 2012 were down more than 40% in real terms from their peak (Shiller 2012). Nevertheless, housing remains a popular investment1.

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Topics:  Global economy

Tags:  inflation, house prices, housing

The housing market and the case for higher inflation targets in the US and the Eurozone

Joshua Aizenman, Menzie D. Chinn 15 May 2012

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The eloquent advocacy for moderate inflation at times of peril goes back to Irving Fisher’s seminal paper on the debt deflation:

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Topics:  Macroeconomic policy Monetary policy

Tags:  US, inflation, housing market, Eurozone crisis

ECB inflation-fighting powers remain intact

Christian Thimann 30 March 2012

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In a recent Vox column, Aaron Tornell and Frank Westermann (2012) argue that with the conduct of three-year liquidity operations, the ECB has “hit a limit in its ability to prevent an acceleration of inflation”. They take issue with a statement by ECB President Mario Draghi that the ECB would react promptly to a worsening inflation outlook.

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Topics:  EU policies Europe's nations and regions Monetary policy

Tags:  ECB, inflation, Eurozone crisis

Has the ECB hit a limit?

Aaron Tornell, Frank Westermann 28 March 2012

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In December, the ECB successfully forestalled a financial crisis by stepping in with a big bazooka and inundating the market with liquidity. Unfortunately, the big bazooka has come at a cost; the composition of the ECB’s balance sheet has changed dramatically.

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Topics:  EU policies Europe's nations and regions Monetary policy

Tags:  ECB, inflation, Eurozone crisis

Financial repression: Then and now

Carmen M Reinhart, Jacob Funk Kirkegaard 26 March 2012

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In light of the record or near-record levels of public and private debt, debt-reduction strategies are likely to remain at the forefront of policy discussions in most of the advanced economies for the foreseeable future (Reinhart and Sbrancia 2011).

Throughout history, debt-to-GDP ratios have been reduced by:

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Topics:  International finance Macroeconomic policy

Tags:  inflation, debt, financial repression

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