As the chair of the United States Federal Reserve from 2006-2014, Ben Bernanke liked to say that monetary policy is 98% talk and only two percent action. In other words, what the central bank says is hugely important. It can affect households, firms, and market expectations, and, in turn, impact the economy. That message could not be more important when considering inflation … [Read more...] about Fighting Inflation With Better Communication
About Victoria Nuguer
When Focusing on the Interest Rate is Not Enough
Before the financial crisis of 2008, most governments lacked an institutional framework for handling financial policy. Central banks focused on monetary policy. They mostly used interest rates to influence inflation and output, believing such a focus could guarantee economic stability. But when it came to financial policy they were inclined to trust the invisible hand of the … [Read more...] about When Focusing on the Interest Rate is Not Enough
How the Financing of Firms Affects Prices
Firms in the developed world rely heavily on bank credit. But firms in developing countries, and particularly those in Latin America, rely much more heavily on trade credit--i.e. credit from their suppliers --and that has immense implications for pricing decisions and inflation. Most studies that have looked at inflation in emerging economies have examined the role of domestic … [Read more...] about How the Financing of Firms Affects Prices
Reducing Volatility from Cross-Border Banking Flows
How can emerging markets protect themselves from abrupt shifts in cross-border banking flows? That has been a fundamental question for economic policymakers in recent years, including those entrusted with banking supervision in regions like Latin America and the Caribbean. In a study made available online in May, Gabriel Cuadra and I examine the issue, focusing on how … [Read more...] about Reducing Volatility from Cross-Border Banking Flows
Dealing with Corporate Debt and Rising Interest Rates
They have risen bit by bit. But since the financial crisis in 2008, the Fed has kept interest rates in the United States exceedingly low. Now with healthier economic growth and employment in the United States, that may be changing, and Latin American countries need to be on their guard. Latin America's major economies have accumulated large amounts of foreign corporate debt … [Read more...] about Dealing with Corporate Debt and Rising Interest Rates