Tag Archives: inflation

What is the benchmark used to measure the effectiveness of monetary policy?

My answer on Quora: There are different indicators one can look at to help assess if the monetary policy of a central bank is effective or not, but such assessments have been getting harder to make. On the surface On the surface, a central bank can be viewed as effective in its monetary policy if […]

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When inflation is running wild, what should governments do to the interest rates?

My answer on Quora: It depends on the source of inflation. Interest rates impact borrowing/savings decisions and can also send a signal about the seriousness of the central bank (whose mandate typically includes some kind of price stability). If inflation shoots up because of a supply shock, then there may not be much interest rates […]

How does credibility affect the cost of reducing inflation?

My answer on Quora: The credibility of a central bank plays a strong role in its ability to achieve its objectives, which often includes price stability (i.e. stable inflation around a desired target). If a central bank lacks credibility, investors and firms won’t have much confidence in the central banks ability to keep inflation around […]

What is the best way to reduce inflation in a developing country?

My answer on Quora: There are many ways to try to fight high inflation in developing countries because there can be many sources of high inflation. Ultimately, the key differences between developed and developing economies in the context of fighting high inflation often deal with the effectiveness of monetary policy and any reliance on imports […]