Abstract:-

Ruchir Agarwal will present a series of reflections on the short- and long-term future of inflation, interest rates, and money. The talk will be based on a three-part article series on the future of inflation, recently published in the Finance & Development (Part 1, Part 2, Part 3), a new working paper “The Fear Economy: A Theory of Output, Interest, and Safe Assets”, an update of the IMF working paper, “Enabling Deep Negative Rates to Fight Recessions: A Guide”, and a recent discussion at the PIIE on the “The Nexus of Interest Rates, Banks, and Politics“.

Key questions he will address include:

· Will high inflation persist globally?

· Why is inflation costly for households (and much higher than what central banks think)?

· Is a future with a zero inflation target possible, and what will be the role of electronic money?

· What is the role of ‘fear’ in driving the long-run neutral rate (r*), and why is the r* likely to persistently decline after recessions?

· Why a key innovation priority for central banks is to enable a faster transition to an ‘electronic money standard’, with the possibility of deeper negative rates?