Introduction

Economies worldwide face an environment of recently heightened uncertainty due to noneconomic factors, as the COVID-19 pandemic and the war in Ukraine. In response to the COVID-19 pandemic, policymakers quickly activated a broad range of monetary and fiscal instruments to provide exceptional support to counter the deep impact on output and incomes, even though policy instruments were already stretched uncomfortably close to their limits leading, eventually, to a noticeable rise in inflation, which remains, nevertheless, a monetary phenomenon. In their quest to fight inflation effectively, policymakers need to eliminate, whenever possible, surprises in both monetary and fiscal policies. This book provides an analytical framework in the context of intense globalization and increased interdependence across economies (irrespective of the recent re-examining of supply chains and trade relationships), as well as a policy framework thoroughly amended after the global financial crisis and the crises that followed it. The book presents policy proposals useful to central banking practitioners, monetary and fiscal policymakers, as well as academic researchers of how policymakers must strive to build a set of policies that the public has faith in and will take into account when forming expectations of future inflation and spending.