Raphael Auer, 21 February 2011

This column says that low US inflation over the last 15 years is partly attributable to cheap Chinese imports. It argues that if the US trade deficit is reduced – via either Chinese inflation or a nominal appreciation of the renminbi – this disinflationary effect will be reduced. It says that the resulting inflationary impulse could be severe.

James Reade, Ulrich Volz, 18 February 2011

China is grappling with rising inflation. This column argues that the Chinese government, instead of focusing on micro-managing the economy, should grant its central bank room for further reform of its monetary policy. To make more efficient use of the interest-rate instrument, China's policymakers will need to further loosen the dollar peg.

Domingo Cavallo, Fernando Díaz, 17 February 2011

With growing inflation in China, policymakers are facing tough decisions. This column argues that if the government is to curb inflation without allowing for the deflation of the tradables, it should do so though sector focused policies. Monetary policy is already committed to the objective of preventing deflation of the tradables and to dampen the credit cycle that is behind asset bubbles.

Nicolas Groshenny, 02 February 2011

Was monetary policy in the US too easy between 2002 and 2006? This column argues "no”. It shows that the large and persistent deviations from the Taylor rule over that period were indeed consistent with the pursuit of the Federal Reserve's dual mandate.

Yuriy Gorodnichenko, Olivier Coibion, 28 January 2011

As the US economy recovers in fits and starts, attention is turning to exit strategies. How will the Fed unwind its quantitative easing? This column presents evidence of substantial levels of policy inertia in monetary policy. It says that we should not expect rapid policy changes in the near future – barring clear signs of economic distress.

Luis Catão, Roberto Chang, 27 January 2011

Rising food prices once again pose central banks a tricky question. How far should they ignore food price inflation? This column suggests that food tends to have stronger predictive power on global inflation cycles than oil. The problem is more severe in emerging markets where consumption basket weights for food are two or three times larger than in rich nations. Central banks should pay close attention.

Syed Basher, 24 December 2010

The controversial decision to grant the 2022 FIFA World Cup to Qatar is set to provide the country with billions of dollars of revenue. This column argues that one overlooked consequence will be inflationary pressure and suggests “World Cup bonds”, among other tools, could help Qatar keep price rises in check.

Raphael Auer, Andreas Fischer, 05 December 2010

Over the past two decades, Western European trade has become increasingly integrated with emerging economies. This column uses a novel empirical technique to show that import competition from East Asian low-wage countries – in particular China – has dampened inflation in five Western European nations. Increased integration with Turkey and Central and Eastern Europe, meanwhile, has had little effect on inflation.

Roger Farmer, 08 November 2010

CEPR Discussion Paper 8100 re-examines the ability of old-Keynesian and new-Keynesian models to cope with persistence of unemployment. The author argues the an import input of persistent unemployment is the "animal spirits" of the unemployed. He tests an old-Keynesian model in which the Phillips curve is replaced by a belief function and finds it a better fit for the data than new-Keynesian variants.

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.

Harald Uhlig, Pedro Teles, 18 October 2010

As the limits of fiscal policy become obvious, monetary policy tools look increasingly attractive to policymakers. Discussion Paper 8049 re-examines the evidence for quantity theory and finds that the textbook relationship between average inflation and the growth rate of money is tenuous in many cases. The authors caution policymakers not to over-interpret the conclusion of quantity theory.

André Meier, 21 September 2010

What happens to inflation during a downturn? This column documents the behaviour of inflation during 25 episodes of persistent large output gaps in 14 advanced economies over the last 40 years. It finds that such episodes bring about significant disinflation, although inflation tends to bottom out at low positive rates. Recent developments in advanced economies appear consistent with this disinflationary effect.

Wendy Carlin, David Soskice, 23 August 2010

The aftermath of the global crisis has highlighted the need to reassess outdated open economy models like the Mundell-Fleming model. The authors of CEPR DP7979 simplify an unwieldy New Keynesian model to help non-specialists and policymakers analyze key challenges of macroeconomic policymaking in an open economy, including CPI inflation targeting and exchange rate overshooting.

Patrick Minford, Jingwen Fan, 19 February 2010

What happened to UK inflation in the 1970s? This column presents new research interpreting the period as an example of the “fiscal theory of the price level”. As predicted by the theory, inflation followed a random walk.

Olivier Coibion, Yuriy Gorodnichenko, 16 January 2010

Was the Great Moderation “something of a fluke”? This column argues that good monetary policy did play a role in taming inflation. It argues that the current recession, while clearly severe by historical standards, does not seem to imply a return to the levels of volatility observed in the 1970s.

Joshua Aizenman, Nancy Marion, 18 December 2009

As the US debt-to-GDP ratio rises towards 100%, policymakers will be tempted to inflate away the debt. This column examines that option and suggests that it is not far-fetched. US inflation of 6% for four years would reduce the debt-to-GDP ratio by 20%, a scenario similar to what happened following WWII.

Domingo Cavallo, Joaquín Cottani, 12 May 2009

Economists’ opionions diverge greatly on how to resolve China’s “dollar trap”. This column suggests all US creditors need to do is demand that the US government swap nominal US Treasury bills, notes, and bonds for inflation-adjusted instruments. This will reduce the incentive of the US government to “inflate its way out of debt”, protect the value of emerging market reserves and redcue the risk of a resurgence in world inflation.

Robert Hall, Susan Woodward, 13 April 2009

The Fed’s astoundingly large increase in reserves has many worried about future inflation and wringing their hands over exit strategies. This column argues that the Fed can control inflation by varying the interest rate it pays (or charges) banks on their reserve holding. Consequently, the Fed’s exit strategy need not be constrained by concerns about inflation – reserve interest-rate policy can take care of inflation, but the Fed should publically announce this policy.

Sylvester Eijffinger, 15 January 2009

There are growing concerns about deflation. This column argues that inflation remains the far more relevant danger and cautions against lowering Eurozone interest rates too quickly

Carmen Reinhart, 25 July 2008

Carmen Reinhart, in work with Kenneth Rogoff, has developed a comprehensive new database spanning eight centuries for studying debt and banking crises, inflation, currency crashes and debasements. She talks to Romesh Vaitilingam about the lessons for today’s global financial crisis, noting that although we may not have seen explicit sovereign debt defaults for a while, a growing number of emerging markets are now defaulting through inflation.



CEPR Policy Research