Ricardo Reis on the Macroeconomics of Financial Crises and the Recent Inflation Surge
Macro Musings with David Beckworth
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The Power of Credibility in Inflation
Central banks have a very powerful to do something about it. You are the monopoly supplier of the currency. And you have this overwhelming power over inflation. The main one is certainly the interest rate in how it changes the attractiveness of nominal versus real investments. But moreover, there's also the fact that announcements, credibility affect people's inflation expectations. That is likewise an extremely powerful tool and an extremely powerful mechanism.
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