Rules versus Discretion and Managing Financial Sector Stress

with Michael Moore and Ian Tower Economic policies are increasingly subject to rules-based frameworks, except perhaps in the financial sector. A growing number of countries conduct their fiscal policies within a rules-based framework that features expenditure, deficit, or debt targets. In many economies, monetary policy is set as a function of forecast and targeted inflation, […]

Rules versus Discretion and Managing Financial Sector Stress

with Michael Moore and Ian Tower Economic policies are increasingly subject to rules-based frameworks, except perhaps in the financial sector. A growing number of countries conduct their fiscal policies within a rules-based framework that features expenditure, deficit, or debt targets. In many economies, monetary policy is set as a function of forecast and targeted inflation, […]

The exchange rate of the Euro: cause for alarm?

in collaboration with Emil Stavrev The exchange rate of the euro is in the headlines, as it has been steadily appreciating over the past year and a half. Views on this development among euro-area policymakers were initially quite different but have now broadly converged to one of concern. Softening global growth prospects have probably played […]

2007 Nobel Prize in Economics – What Mechanism Design Theory Says About Europe’s Financial Stability Framework

in collaboration with Martin Čihák, IMF By awarding the 2007 Nobel Prize in economics to Leonid Hurwicz, Eric Maskin, and Roger Myerson, the Royal Swedish Academy of Sciences highlighted the importance of mechanism design, an arcane-sounding theory with numerous practical applications. The Academy mentioned applications to trading mechanisms, regulation schemes, and voting procedures. But mechanism […]