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26 Aug 2022
How Will the Pandemic and War Shape Future Monetary Policy?
After more than three decades of Great Moderation which saw inflation trending down in both advanced economies (AEs) and emerging markets (EMs), inflation has surged over the last year almost everywhere (Figure 1). The recent period is also unique because of the two tail-risk events that have played out: a global pandemic and Russia’s invasion of Ukraine. It is therefore natural to ask what lessons, if any, this period offers for the conduct of monetary policy in the future. I will cap the horizon at 5 years as that seems a reasonable horizon over which to speculate about the future.
