Topic Archive: Monetary Policy

How do we tackle inflation with limited credibility? Don’t ignore the intermediate targets

How do we tackle inflation with limited credibility?

Mridula Duggal and Luis E. Rojas develop a theoretical framework on the success of Chile and Colombia during their battle against high inflation in the 1990s. Their research provides valuable insights into how central banks with limited credibility and independent monetary policy can manage the tradeoff between low inflation and associated output losses. 

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U-Shaped Monetary Policy Increases the Risk of a Banking Crisis

coins stacked on top of one another nearly falling

With year-on-year inflation rates reaching 10% in 2022, central banks in Europe and the United States started raising monetary policy rates to ensure price stability. The failure of Silicon Valley Bank (SVB) on March 10, 2023, however, laid bare the financial stability risks from hiking interest rates after a prolonged period of rate cuts. For…

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