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Central Banks and Inflation: Where Do We Stand and How Did We Get Here?

Karl Whelan ()

No 202120, Working Papers from School of Economics, University College Dublin

Abstract: The inability of central banks to attain their target inflation rates in recent years has raised questions about the extent to which central banks can control the inflation process. This paper discusses the evolution of thought and evidence since the 1960s on the determinants of inflation and the role that should be played by central banks. The paper highlights the roles played by two streams of thought associated with Milton Friedman: Monetarist theories predicting a key role for monetary aggregates in determining inflation and the rise in popularity of the expectations-augmented Phillips curve. We discuss influence of the latter in determining the modern consensus on central bank institutions and the relative roles for fiscal and monetary policies. We conclude with a discussion of macroeconomic developments of the past decade and current policy options to stimulate the economy and restore inflation to its target levels, including the merits of “helicopter money”.

Keywords: Inflation; Central banks; Phillips curve; Milton Friedman (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2021-08
New Economics Papers: this item is included in nep-ban, nep-cba, nep-his, nep-hpe, nep-mac and nep-mon
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Downloads: (external link)
http://hdl.handle.net/10197/12561 First version, 2021 (application/pdf)

Related works:
Journal Article: Central banks and inflation: where do we stand and how did we get here? (2021) Downloads
Working Paper: Central Banks and Inflation: Where Do We Stand and How Did We Get Here? (2021) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:202120

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