Ongoing research on monetary economics

Emi Nakamura & Jón Steinsson summarise the ongoing research on monetary economics in NBER Reporter:

For much of the last decade, policymakers in advanced economies have grappled with challenges resulting from the Great Recession of 2007–09 and sovereign debt problems in Europe. During this time, inflation was persistently below targets set by central banks in the United States, Europe, and Japan. As a consequence, a major focus of research and practice was how to further stimulate these economies through unconventional monetary policy and raise their rates of inflation toward target levels.

More recently, the global economic downturn and subsequent rebound associated with COVID-19 have shifted the focus of both research and practice. In 2021, advanced economies — and especially the United States — have experienced a substantial increase in inflation, to levels well above target. This has raised concerns about the reemergence of inflation that have been largely dormant for some time.

Alongside these macroeconomic developments, the field of monetary economics has been influenced by other societal changes, such as rising inequality, increasing concern about climate change, and the development of new technologies such as blockchains and cryptocurrencies.

Several strands of methodological and theoretical advances also have made a large imprint on the field of monetary economics over the past decade. On the empirical side, researchers have increasingly embraced new data sources, including high-frequency and cross-sectional data, and methods of identification. The increased use of forward guidance — statements by central banks about the future path of policy rates — has raised significant theoretical issues and resulted in a burst of innovative research. Also, the development of heterogeneous agent New Keynesian models — HANK models — has been important.

In this brief program report, we highlight several strands of innovative research on these issues, conducted by affiliates of the NBER’s Monetary Economics Program. 

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