Luis Viceira, John Campbell, Adi Sunderam, 27 October 2010

The historically low yields on Treasury bonds are the hallmark of a bubble, according to some commentators. This column analyses the relationship between bond yields, the stock market, and inflation over the past 50 years. It finds that the riskiness of nominal bonds changes over time and that investors and policymakers can use the changing stock-bond correlation as a real-time measure of inflation expectations.

Olivier Blanchard, Marianna Riggi, 07 December 2009

In the 1970s, large increases in the price of oil were associated with sharp decreases in output and large increases in inflation. In the 2000s, even larger increases in the price of oil were associated with much milder movements. This column attributes the difference in the US to more flexible labour markets and more credible monetary policy during the Great Moderation.

Jakob de Haan, Jan-Egbert Sturm, 27 June 2009

Should informed observers pay attention to the ECB President? This column says it is worthwhile for financial market participants to read the ECB President’s lips, as this adds information about upcoming interest rate decisions that is not provided by expected inflation and expected output growth.

Micael Castanheira, 14 October 2008

Fears that the present crisis might reach 1930s proportions risk becoming a self-fulfilling prophecy. To quell them, we must anchor expectations in the right direction. This column advocates a temporary but aggressive expansionary fiscal policy to rebuild confidence. We need to exploit the stability pact in a different way: for the next two years, the pact should constrain national governments to significantly increase all deficits, beyond 3% if needed.

Tommaso Monacelli, 20 March 2008

Inflation is rising. This column identifies three sources of inflation and argues that it is very important for central banks to tame inflation now, before we face a vicious cycle of rising inflation and expected inflation.

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