The recent global economic crisis has renewed interest in the nature and history of monetary policy, the distributional effects of central bank policy, central bank governance, and the personalities at the helm of major central banks. In modern times, a country’s central bank formulates, or, to a minimum, implements, a country’s monetary policy, or the process of adjustment of a country’s money supply to achieve some combination of stable prices and sustainable economic growth. Monetary policy depends heavily on a country’s exchange rate system. Under fixed exchange rates, the country’s commitment to keep the level of the currency at a certain level dictates monetary policy to a great degree. As the gold standard was unraveling after World War I, many countries experienced high inflation or even hyperinflation. A similar situation faced monetary policy after the collapse of the Bretton Woods system of fixed exchange rates in the 1970s. By the 1980s, however, countries turned toward central bank independence as an institutional arrangement to control inflation. The current issues surrounding monetary policy have emerged from the historical increase in central bank independence and the 2007 economic and financial crisis. In particular, the opacity of central bank decisions, given their autonomy to pursue stable prices without political interference, has increased the demand for transparency and communication with the government, the public, and financial markets. Also, the 2007 crisis pushed central banks toward unconventional measures and macro-prudential regulation, and brought back into focus the monetary policy of the euro area.
All governments require revenue, and domestic taxes are the primary means for generating it. Yet both the size and shape of taxation vary significantly across countries and have been transformed over time. What explains variation in domestic taxation? To answer this question, recent scholarship on taxation has focused on the politics of taxation as a tool for redistribution. This has led to a wide body of research on the fiscal impact of taxation and on the introduction, evolution, and variation in direct and progressive tax regimes, particularly the income tax. Yet the focus on taxation as a redistributive tool yields a puzzle, as more progressive tax systems tend to be found where redistribution is in fact the lowest. Explanations of this paradox often center on the impossibility of high and progressive taxes on capital in the context of international economic integration. Not as well studied are taxes other than the taxation of income, and the deliberate politics of nonfiscal, regulatory, and incentive effects of different tax choices. Methodologically, problems of endogeneity are ubiquitous in the study of tax policy choices, but more sophisticated experimental work is well underway in research on individual preferences for taxation.