Inflation targeting has emerged as the dominant monetary policy framework in advanced and emerging market economies. This column discusses three main challenges faced by inflation-targeting central banks: the recent high-inflation episode and increasingly frequent supply-side disruptions; expanding central bank balance sheets since the Global Crisis; and risks to central bank independence. The authors argue that […]
President Trump’s “Liberation Day” announcement triggered a discussion of whether import tariffs can reduce trade deficits or boost certain industries. This column develops a model, calibrated to the US economy, which illustrates how a uniform import tariff generates both expansionary effects upstream and contractionary effects downstream and is highly inflationary, reflecting its hybrid nature as […]
Understanding how households interpret macroeconomic policy is vital to the effectiveness of central banks. This column demonstrates that the reactions of individual households frequently contradict standard theoretical playbooks. Using euro area survey data, the authors find that households interpret policy through a lens shaped by recent crises – such as the energy shock following Russia’s […]
Every year, the World Bank Group classifies the world’s economies into four income groups: low, lower-middle, upper-middle, and high. These classifications, updated each year on July 1, are based on the previous year’s Gross National Income (GNI) per capita, expressed in U.S. dollars using the Atlas method. The Importance of Income Classification A country’s income classification not only […]
During the pandemic, annual CPI inflation in the US rose sharply to a peak of 9% in June 2022. This column argues that the rise of inflation can be explained with a framework in which inflation depends on three factors: long-term expectations, the tightness of the labour market as measured by the vacancy-to-unemployment ratio, and […]
The world is adjusting to President Trump’s second ‘first hundred days’ in office. This column introduces a new CEPR eBook in which over 50 experts explore how the new administration’s policies are reshaping the US economy and sending ripples across the global economic order. While the assessment is preliminary, in part due to the great […]
As global debt continues to climb, evaluating debt risks is critical. This column introduces a novel ‘debt-at-risk’ framework that uses information on current macro-financial and political conditions to construct the full distribution of potential future debt outcomes. The framework shows that debt risks are high, rising, and tilted to the upside. Debt levels are projected […]
Tariffs affect both supply and demand, possibly with contrasting effects on prices. This column shows that renewed US-China tensions could redirect Chinese exports to the euro area, boosting supply and lowering prices. Using detailed trade and inflation data, it estimates that such diversion could cut core euro area inflation by 0.3 percentage points over two […]
The Phillips curve describes the relationship between inflation and real economic activity over the business cycle. This column challenges the notion that the Phillips curve is flat. Using pre-pandemic Belgian micro data, it shows that inflation responds to variations in production costs but is insensitive to variations in output. The flatness of the conventional output-gap […]
The global economy is facing heightened uncertainty, clouding economic forecasts. In our recently launched April 2025 Middle East and North Africa Economic Update , we report that growth in MENA averaged a modest 1.9% in 2024 and is forecast to accelerate moderately to 2.6% in 2025. But growth forecasts for countries across the region are shadowed in […]
