Oversight hearing on Council on Wage and Price Stability : hearing before the Subcommittee on Economic Stabilization of the Committee on Banking, Finance and Urban Affairs, House of Represenatives, Ninety-sixth Congress, first session, October 10, 1979.

"Serial no. 96-33."

Cost-of-living escalator clauses and inflation : prepared for the Council on Wage and Price Stability /

Mode of access: Internet.

A quarterly report of the Council on Wage and Price Stability /

Vol. for include a special report on inflation.

The financial stability risks of ultra-loose monetary policy. Bruegel Policy Contribution Issue 2015/03

Ultra-loose monetary policies, such as very low or even negative interest rates, large-scale asset purchases, long-maturity lending to banks and forward guidance in central bank communication, aim to increase inflation and output, to the benefit of financial stability. But at the same time, these measures pose various risks and might create challenges for financial institutions. • By assessing the theoretical literature and developments in the United States, United Kingdom and Japan, where very expansionary monetary policies were adopted during the past six years, and by examining the euro-area situation, we conclude that the risks to financial stability of ultra-loose monetary policy in the euro area could be low. However, vigilance is needed. • While monetary policy should focus on its primary mandate of area-wide price stability, other policies should be deployed whenever the financial cycle deviates from the economic cycle or when heterogeneous financial developments in the euro area require financial tightening in some but not all countries. These policies include micro-prudential supervision, macro-prudential oversight, fiscal policy and regulation of sectors that pose risks to financial stability, such as construction.

Evaluation of the pay and price standards program /

Mode of access: Internet.

Interim final price standards /

Cover title.

Inflation and factor shares

We use results from the literature on the determinants of price-cost margins to derive an equation relating labor's share of national income to the inflation rate (as well as to the output gap, the unemployment rate and the capital stock per worker). The equation is tested with a panel of 15 OECD countries. We obtain a robust positive relationship between inflation and the labor share. Our results suggest that disinflation is not distributively neutral, provide empirical support for the distinct concern about price stability shown by trade unions and employers' organizations, and help explaining the negative impact of inflation on growth.

Inflation Uncertainty, Exchange Rate Depreciation and Volatility: Evidence from Ghana, Mozambique and Tanzania

While flexible exchange rates facilitate stabilisation, exchange rate fluctuations can cause real volatility. This gives policy importance to the causal relationship between exchange rate depreciation and its volatility. An exchange rate may be expected to become more volatile when the underlying currency loses value. We conjecture that a reverse causation, which further weakens the currency, may be mitigated by price stability. Data from Ghana, Mozambique and Tanzania support this: depreciation makes exchange rate more volatile for all but volatility does not causes depreciation in Tanzania which has enjoyed a more stable inflation despite all countries adopting similar macro-policies since early 1990s.

The Monetary policy rules in Europe: heterogeneity and common patters

The objective of this study is the empirical identification of the monetary policy rules pursued in individual countries of EU before and after the launch of European Monetary Union. In particular, we have employed an estimation of the augmented version of the Taylor rule (TR) for 25 countries of the EU in two periods (1992-1998, 1999-2006). While uniequational estimation methods have been used to identify the policy rules of individual central banks, for the rule of the European Central Bank has been employed a dynamic panel setting. We have found that most central banks really followed some interest rate rule but its form was usually different from the original TR (proposing that domestic interest rate responds only to domestic inflation rate and output gap). Crucial features of policy rules in many countries have been the presence of interest rate smoothing as well as response to foreign interest rate. Any response to domestic macroeconomic variables have been missing in the rules of countries with inflexible exchange rate regimes and the rules consisted in mimicking of the foreign interest rates. While we have found response to long-term interest rates and exchange rate in rules of some countries, the importance of monetary growth and asset prices has been generally negligible. The Taylor principle (the response of interest rates to domestic inflation rate must be more than unity as a necessary condition for achieving the price stability) has been confirmed only in large economies and economies troubled with unsustainable inflation rates. Finally, the deviation of the actual interest rate from the rule-implied target rate can be interpreted as policy shocks (these deviation often coincided with actual turbulent periods).

The Monetary policy rules and the inflation process in open emerging

This paper has three objectives. First, it aims at revealing the logic of interest rate setting pursued by monetary authorities of 12 new EU members. Using estimation of an augmented Taylor rule, we find that this setting was not always consistent with the official monetary policy. Second, we seek to shed light on the inflation process of these countries. To this end, we carry out an estimation of an open economy Philips curve (PC). Our main finding is that inflation rates were not only driven by backward persistency but also held a forward-looking component. Finally, we assess the viability of existing monetary arrangements for price stability. The analysis of the conditional inflation variance obtained from GARCH estimation of PC is used for this purpose. We conclude that inflation targeting is preferable to an exchange rate peg because it allowed decreasing the inflation rate and anchored its volatility.

Multiple Objectives in Monetary Policy: A de Facto Analysis for ‘Advanced’ Countries

A statistical methodology is developed by which realised outcomes can be used to identify, for calendar years between 1974 and 2012, when policy makers in ‘advanced’ economies have successfully pursued single objectives of different kinds, or multiple objectives. A simple criterion is then used to distinguish between multiple objectives pure and simple and multiple objectives subject to a price stability constraint. The overall and individual country results which this methodology produces seem broadly plausible. Unconditional and conditional analyses of the inflation and growth associated with different types of objectives reveal that multiple objectives subject to a price stability constraint are associated with roughly as good economic performance as the single objective of inflation. A proposal is then made as to how the remit of an inflation-targeting central bank could be adjusted to allow it to pursue other objectives in extremis without losing the credibility effects associated with inflation targeting.

Strategic Delegations in Monetary Unions

In monetary unions, monetary policy is typically made by delegates of the member countries. This procedure raises the possibility of strategic delegation - that countries may choose the types of delegates to influence outcomes in their favor. We show that without commitment in monetary policy, strategic delegation arises if and only if three conditions are met: shocks affecting individual countries are not perfectly correlated, risk-sharing across countries is imperfect, and the Phillips Curve is nonlinear. Moreover, inflation rates are inefficiently high. We argue that ways of solving the commitment problem, including the emphasis on price stability in the agreements constituting the European Union are especially valuable when strategic delegation is a problem.

Strategic delegation in monetary unions

In monetary unions, monetary policy is typically made by delegates of the member countries. This procedure raises the possibility of strategic delegation - that countries may choose the types of delegates to influence outcomes in their favor. We show that without commitment in monetary policy, strategic delegation arises if and only if three conditions are met: shocks affecting individual countries are not perfectly correlated, risk-sharing across countries is imperfect, and the Phillips Curve is nonlinear. Moreover, inflation rates are inefficiently high. We argue that ways of solving the commitment problem, including the emphasis on price stability in the agreements constituting the European Union are especially valuable when strategic delegation is a problem.

The new Keynesian approach to monetary policy analysis: Lessons and new directions

I discuss several lessons regarding the design and conduct of monetary policy that have emerged out of the New Keynesian research program. Those lessons include the bene.ts of price stability, the gains from commitment about future policies, the importance of nat-ural variables as benchmarks for policy, and the bene.ts of a credible anti-inflationary stance. I also point to one challenge facing NK modelling efforts: the need to come up with relevant sources of policy tradeoffs. A potentially useful approach to meeting that challenge, based on the introduction of real imperfections, is presented.