"Comment on Michael Woodford, 'Inflation Targeting and Financial Stability',"
Sveriges Riksbank Economic Review, forthcoming.
PDF.Recent work, organized by topic
Lars E.O. Svensson
Home | New | Topics | Contact | Short bio | CV | Teaching | Links | Search | IIES | Sveriges Riksbank | Google
Practical monetary policy | Monetary policy: general | Reviews of monetary policy New Zealand Norway Sweden | Monetary policy under uncertainty | Inflation targeting: general | Inflation-forecast targeting | Inflation targeting in open economies | Monetary-policy rules | Japan, the Foolproof Way, and liquidity traps | Monetary targeting and monetary indicators | Price-level targeting | Transparency | The Eurosystem and the ECB | Exchange-rate targeting vs. inflation targeting | Extracting market expectations from financial instruments | Realignment expectations in fixed exchange-rate regimes | Public debt and inflation incentives | Comments, debate, etc.
This is an attempt to organize the last few year's work reported on my homepage (that is, from about 1995) by topic. (For older work, see my CV). When the same paper deals with several topics, it will appear under several headings.
Comments and suggestions on the page are most welcome.
Practical monetary policy Top | New
Riksbank monetary policy decisions
Policy-related speeches, presentations, interviews, and papers since my appointment as Deputy Governor of Sveriges Riksbank in May 2007
Monetary policy: general Top | New
"Inflation Targeting," in Friedman, Benjamin M., and Michael Woodford, eds., Handbook of Monetary Economics, Volume 3b, chapter 22, Elsevier. PDF. Abstract.
The chapter discusses the history, theory, practice, and future of inflation targeting.
"Evaluating Monetary Policy," in Koenig, Evan F., Robert Leeson, and George A. Kahn, eds., The Taylor Rule and the Transformation of Monetary Policy, Hoover Institution Press, 2012, p. 245-274 (revision and update of speech on March 13, 2009). PDF. Abstract.
The line: With a modified Taylor curve, the forecast Taylor curve, and plots of mean squared gaps showing the tradeoff between the variability of the inflation-gap and output-gap forecasts it is possible to evaluate policy ex ante, that is, taking into account the information available at the time of the policy decisions, and even evaluate policy in real time.
"Anticipated Alternative Instrument-Rate Paths in Policy Simulations" (with Stefan Laséen, Sveriges Riksbank), revised May 2011. Forthcoming in International Journal of Central Banking. PDF. Abstract.
The line: We demonstrate a simple algorithm to do policy simulations with alternative arbitrary instrument-rate paths that are anticipated rather than unanticipated as in the method of modest interventions of Leeper and Zha.
"Optimal Monetary Policy," keynote lecture at the Workshop on Optimal Monetary Policy, Norges Bank, November 21-22, 2008, slides.
The line: Optimal monetary policy can in theory be seen as equivalent to choosing an optimal policy function, but it can in practice better be seen as choosing an optimal projection of the instrument rate, inflation, and resource utilization in a set of feasible projections so as to minimize an intertemporal loss functin corresponding to central-bank objectives.
"Optimal Monetary Policy in an Operational Medium-Sized DSGE Model" (with Malin Adolfson, Stefan Laséen, and Jesper Lindé, Sveriges Riksbank), July 2010, Journal of Money, Credit and Banking, forthcoming. PDF. Abstract. Technical Appendix. Longer June 2009 version.
The line: We show how to construct optimal policy simulation in Ramses, the Riksbank's open-economy medium-sized DSGE model for forecasting and policy analysis. Optimal policy under commitment fits Riksbank past policy better than simple instrument rule without policy shock.
"Transparency under Flexible Inflation Targeting: Experiences and Challenges," Sveriges Riksbank Economic Review 1/2009, 5-44. PDF. Abstract.
The line: Some personal views and reflections on transparency experiences and challenges following my first year as Deputy Governor at Sveriges Riksbank.
"Optimal Monetary Policy under Uncertainty: A Markov Jump-Linear-Quadratic Approach" (with Noah Williams, University of Wisconsin), Federal Reserve Bank of St. Louis Review 90(4), 2008, 275-293, PDF. Abstract.
The line: We use a Markov jump-linear-quadratic (MJLQ) approach to analyze how policy is affected by uncertainty, learning, and experimentation, finding that learning may have sizeable effects on losses and need not always be beneficial, whereas the experimentation component typically has little effect and can in some cases lead to attenuation of policy.
"Optimal Monetary Policy under Uncertainty in DSGE Models: A Markov-Jump-Linear-Quadratic Approach" (with Noah Williams, University of Wisconsin), presented at the conference on Monetary Policy Under Uncertainty and Learning, Santiago, Chile, November 2007, PDF. Abstract.
The line: We use a Markov jump-linear-quadratic (MJLQ) approach to a benchmark New Keynesian model, analyzing how policy is affected by uncertainty, and how learning and active experimentation affect policy and losses. .
"What Have Economists Learned about Monetary Policy over the past 50 Years?," in Herrman, Heinz, ed., Monetary Policy Over Fifty Years: Experiences and Lessons, Routledge, 2009. PDF. Press release, September 2008.
The line: A personal view about the research on monetary policy that is most relevant to practical monetary policy, starting with Milton Friedman's Presidential Address in December 1967.
"Inflation Targeting," May 2007, in The New Palgrave Dictionary of Economics, 2nd edition, edited by Larry Blum and Steven Durlauf, forthcoming, PDF.
The line: Inflation targeting was introduced in New Zealand in 1990; has been very successful in terms of stabilizing both inflation and the real economy; has as of 2007 had been adopted by more than 20 industrialized and non-industrialized countries; and is characterized by an announced numerical inflation target, an implementation of monetary policy that gives a major role to an inflation forecast and has been called ‘inflation-forecast targeting’, and a high degree of transparency and accountability.
"Bayesian and Adaptive Optimal Policy under Model Uncertainty" (with Noah Williams, University of Wisconsin), September 2007, PDF. Abstract.
The line: Bayesian optimal policy (which includes both learning and experimentation) in a both general and tractable case of model uncertainty is compared to adaptive optimal policy (which includes learning but excludes experimentation), and the results indicate that optimal experimentation brings only modest gains above the learning under adaptive optimal policy.
"The Role of Science in Best-Practice Monetary Policy: In Honor of Otmar Issing," presented at "Monetary Policy: A Journey from Theory to Practice," an ECB Colloqium held in honor of Otmar Issing in Frankfurt, March 16-17, 2006, PDF. Abstract.
The line: There is a considerable amount of science in current best-practice monetary policy, but a considerable amount of judgment is also needed., which judgment preferably should be used in a systematic and disciplined way.
"The Instrument-Rate Projection under Inflation Targeting: The Norwegian Example," in Stability and Economic Growth: The Role of Central Banks, Banco de Mexico, 2006, 175-198, PDF. Abstract.
The line: By publishing optimal projections of the instrument rate, inflation, and the output gap with uncertainty intervals, together with discussion, alternative scenarios, criteria for optimal projections (targeting rules), and cross-checking with alternative policy rules, Norges Bank (the central bank of Norway) has provided a model in transparent flexible inflation targeting for other central banks.
"Monetary-Policy Challenges: Monetary-Policy Responses to Oil-Price Changes,'' presented at the meeting of the Bellagio Group of the G10, held at the Federal Reserve Board, Washington, DC, January 13-14, 2006, PDF.
The line: Central banks should respond to oil prices to the extent these impact forecasts of inflation and the output gap, and because this impact is complex, the response will be be complex and cannot be represented by a simple instrument rule.
"Monetary Policy with Model Uncertainty: Distribution Forecast Targeting" (with Noah Williams, University of Wisconsin), May 2007, PDF. Abstract and Matlab programs.
The line: A very flexible, powerful, and yet tractable framework for the analysis and determination of optimal monetary policy under model uncertainty and certainty non-equivalence is introduced and shown to incorporate a large variety of different configurations of uncertainty and central-bank judgment.
The line: Substantial progress can be made by inflation-targeting central banks by (1) employing an explicit intertemporal loss function, (2) making explicit decisions on optimal projection paths of the instrument rate, (3) publishing such projections, and (4) incorporating judgment and model uncertainty in a systematic way.
"Social Value of Public Information: Morris and Shin (2002) Is Actually Pro Transparency, Not Con," American Economic Review 96 (2006) 448-451, PDF. Abstract.
The line: Morris and Shin's result in their 2002 AER paper has widely been interpreted as an anti-transparency result, but it is actually a pro-transparency result.
"Monetary Policy with Judgment: Forecast Targeting," International Journal of Central Banking 1(1) (2005) 1-54, PDF. Abstract. Appendix.
The line: Monetary policy that uses central-bank judgment - information, knowledge, and views outside the scope of a particular model - may perform much better than monetary policy that disregards judgment and follows a simple instrument rule.
"Flexible Inflation Targeting: Principles and Possible Improvements," seminar at Norges Bank (Bank of Norway), Oslo, on March 25, 2004 (shorter version presented at Conference on Monetary Policy, Norges Bank, March 26, 2004), overhead slides (73 KB).
"Challenges for Monetary Policy,'' presented at the meeting of the Bellagio Group of the G10, held at the National Bank of Belgium, Brussels, January 26-27, 2004, PDF (98 KB).
"Interview: Lars Svensson," interview in Central Banking, Vol. XIV, No. 2, November 2003, 51-59, PDF (118 KB).
"Commentary” (on Laurence H. Meyer, “Practical Problems and Obstacles to Inflation Targeting"), Federal Reserve Bank of St. Louis Review 84(4) (July/August 2004) 161-164. PDF.
"Monetary Policy and Learning," Federal Reserve Bank of Atlanta Economic Review, Third Quarter 2003, 11-16, PDF (109 KB).
"Optimal Policy with Low-Probability Extreme Events," in Macroeconomics, Monetary Policy, and Financial Stability - A Festschrift for Charles Freedman, Proceedings of a conference held by the Bank of Canada, Ottawa, June 2003, 79-104. PDF. Abstract.
"Comment on Jeffery D. Amato and Hyun Song Shin, 'Public and Private Information in Monetary Policy Models'," revised June 2003, presented at the conference "Monetary Stability, Financial Stability and the Business Cycle," BIS, Basel, Mar 28-29, 2003, PDF (100 KB).
"Liquidity Traps, Policy Rules for Inflation Targeting, and Eurosystem Monetary-Policy Strategy," research summary, NBER Reporter, Winter 2002/2003, PDF (119 KB). Previous research summary for NBER Reporter, Winter 97/98.
"Implementing Optimal Policy through Inflation-Forecast Targeting," (with Michael Woodford, Columbia University), in Bernanke, Ben S., and Michael Woodford, eds. (2005), The Inflation-Targeting Debate, University of Chicago Press, Chicago, 19-83. PDF. Abstract.
"What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules," Version 3.1, January 2003, Journal of Economic Literature 41 (2003) 426-477, PDF (619 KB). Abstract.
"Targeting Rules vs. Instrument Rules for Monetary Policy: What Is Wrong with McCallum and Nelson?" Federal Reserve Bank of St. Louis Review 87 (2005) 613-626, PDF. Abstract.
The line: A response to McCallum and Nelson's (2005) paper "Targeting Rules vs. Instrument Rules for Monetary Policy," which criticizes my JEL 2003 article "What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules."
A speech by Ben Bernanke, "The Logic of Monetary Policy," Federal Reserve Board, December 2004, discusses these issue (forecast targeting/targeting rules are called "forecast-based policies" and simple instrument rules are called "simple feedback policies").
"An Independent Review of Monetary Policy and Institutions in Norway," by Lars E.O. Svensson (chair) (Princeton University), Kjetil Houg (Alfred Berg), Haakon Solheim (Norwegian School of Management BI) and Erling Steigum (Norwegian School of Management BI), Norges Bank Watch 2002, Centre for Monetary Economics, Norwegian School of Management BI, September 2002.
"Monetary Policy and Real Stabilization," September 2002, in Rethinking Stabilization Policy, A Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 29-31, 2002, 261-312, PDF. Abstract.
Discussion of Vitor Gaspar and Frank Smets, "Monetary Policy, Price Stability and Output Gap Stabilization," and Justin Wolfers, "Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Wellbeing," at the conference "Stabilizing the Economy: What Roles for Fiscal and Monetary Policy?," July 11, 2002, New York, PDF (160 KB).
"Comments on Nancy Stokey, 'Rules and Discretion' after Twenty-Five Years," NBER Macroeconomics Annual 2002, 54-62. PDF (143 KB).
Discussion of Frank Smets and Rafael Wouters, "Monetary Policy in an Estimated SDGE Model of the Euro Area," at the conference "Macroeconomic Models for Monetary Policy," Federal Reserve Bank of San Francisco, Mar 1-2, 2002, overhead slides (PDF, 47 KB).
Discussion of Athanasios Orphanides and John C. Williams, "Imperfect Knowledge, Inflation Expectations, and Monetary Policy," Econometric Society North American Winter Meeting, Atlanta, Jan 4-6, 2002, overhead slides (PDF, 56 KB).
Discussion of Thomas Laubach and John C. Williams, "Measuring the Natural Interest Rate," American Economic Association Annual Meeting, Atlanta, Jan 4-6, 2002, overhead slides (PDF, 51 KB).
"The Inflation Forecast and the Loss Function," in Paul Mizen, ed. (2003), Central Banking, Monetary Theory and Practice: Essays in Honour of Charles Goodhart, Volume I, Edward Elgar, 135-152. PDF (180 KB). Abstract.
Comment on Michael Woodford, "Imperfect Common Knowledge and the Effects of Monetary Policy," in Philippe Aghion, Roman Frydman, Joseph Stiglitz and Michael Woodford, eds., Knowledge, Information and Expectations in Modern Macroeconomics: In Honor of Edmund S. Phelps, Princeton University Press, 2003, 59-63. PDF (88KB).
"Inflation Targeting: Should It Be Modeled as an Instrument Rule or a Targeting Rule?" European Economic Review 46 (2002) 771-780, PDF (135KB). Abstract.
Discussion of Calvo, Celasun and Kumhof, "A Theory of Rational Inflation Inertia," IFM Workshop, NBER Summer Institute, July 16, 2001, overhead slides (PDF, 45KB).
"Comment on Charles Wyplosz, 'Do We Know How Low Inflation Should Be?", April 2001, revised version of comments presented at the First ECB Central Banking Conference, Why Price Stability?, Frankfurt, November 2-3, 2000, PDF (84 KB).
"How Should Monetary Policy Be Conducted in an Era of Price Stability?" in New Challenges for Monetary Policy, a symposium sponsored by the Federal Reserve Bank of Kansas City, held at Jackson Hole, Wyoming, August 26-28, 1999 (IIES Seminar Paper No. 680, CEPR Discussion Paper No. 2342, NBER Working Paper No. 7516), PDF (0.4 MB). Abstract.
"Price Stability as a Target for Monetary Policy: Defining and Maintaining Price Stability," in Deutsche Bundesbank, ed. (2001), The Monetary Transmission Process: Recent Developments and Lessons for Europe, Palgrave, New York, 60-102. (CEPR Discussion Paper No. 2196, NBER Working Paper No. 7276), PDF (0.3 MB). Abstract.
"Commentary: How Should Monetary Policy Respond to Shocks While Maintaining Long-Run Price Stability?—Conceptual issues,'' in Achieving Price Stability, a symposium sponsored by the Federal Reserve Bank of Kansas City at Jackson Hole, Wyoming, August 29-31, 1996, PDF (74 KB).
"Optimal Inflation Targets, 'Conservative' Central banks, and Linear Inflation Contracts," American Economic Review 87 (1997) 98-114. Abstract.
Reviews of monetary policy Top | New
"Evaluating Monetary Policy," speech at Uppsala University, March 13, 2009. English, Swedish.
The line: When evaluating a flexible inflation-targeting regime, it is not enough to simply compare the outcome for inflation with the inflation target; it is necessary to evaluate the central bank's decisions primarily on the basis of the information that was available when the decisions were made (ex ante).
New publication (update of above speech): "Evaluating Monetary Policy," in Koenig, Evan F., Robert Leeson, and George A. Kahn, eds., The Taylor Rule and the Transformation of Monetary Policy, Hoover Institution Press, 2012, p. 245-274. PDF. Abstract.
The line: With a modified Taylor curve, the forecast Taylor curve, and plots of mean squared gaps showing the tradeoff between the variability of the inflation-gap and output-gap forecasts it is possible to evaluate policy ex ante, that is, taking into account the information available at the time of the policy decisions, and even evaluate policy in real time.
Sweden: Finance Committee Report (Finansutskottets betänkande) 2006/07:Fi27, June 2007, PDF (Swedish)
Sweden: Giavazzi, Francesco, and Frederic S. Mishkin, "An Evaluation of Swedish Monetary Policy, 1995-2005," November 2006. PDF, press release.
"Reviews of Monetary Policy in New Zealand and Norway," Newsletter, July 2004, Study Center Gerzensee, Gerzensee, Switzerland. PDF (99 KB).
Norway: "An Independent Review of Monetary Policy and Institutions in Norway," by Lars E.O. Svensson (chair) (Princeton University), Kjetil Houg (Alfred Berg), Haakon Solheim (Norwegian School of Management BI) and Erling Steigum (Norwegian School of Management BI), Norges Bank Watch 2002, Centre for Monetary Economics, Norwegian School of Management BI, September 2002.
New Zealand: "Independent Review of the Operation of Monetary Policy in New Zealand: Report to the Minister of Finance," February 2001.
Monetary policy under uncertainty Top | New
"Optimal Monetary Policy under Uncertainty: A Markov Jump-Linear-Quadratic Approach" (with Noah Williams, University of Wisconsin), Federal Reserve Bank of St. Louis Review 90(4), , 2008, 275-293, PDF. Abstract.
The line: We use a Markov jump-linear-quadratic (MJLQ) approach to analyze how policy is affected by uncertainty, learning, and experimentation, finding that learning may have sizeable effects on losses and need not always be beneficial, whereas the experimentation component typically has little effect and can in some cases lead to attenuation of policy.
"Optimal Monetary Policy under Uncertainty in DSGE Models: A Markov-Jump-Linear-Quadratic Approach" (with Noah Williams, University of Wisconsin), presented at the conference on Monetary Policy Under Uncertainty and Learning, Santiago, Chile, November 2007, PDF. Abstract.
The line: We use a Markov jump-linear-quadratic (MJLQ) approach to a benchmark New Keynesian model, analyzing how policy is affected by uncertainty, and how learning and active experimentation affect policy and losses. .
"Bayesian and Adaptive Optimal Policy under Model Uncertainty" (with Noah Williams, University of Wisconsin), September 2007, PDF. Abstract.
The line: Bayesian optimal policy (which includes both learning and experimentation) in a both general and tractable case of model uncertainty is compared to adaptive optimal policy (which includes learning but excludes experimentation), and the results indicate that optimal experimentation brings only modest gains above the learning under adaptive optimal policy.
"Monetary Policy with Model Uncertainty: Distribution Forecast Targeting" (with Noah Williams, University of Wisconsin), May 2007, PDF. Abstract and Matlab programs.
The line: A very flexible, powerful, and yet tractable framework for the analysis and determination of optimal monetary policy under model uncertainty and certainty non-equivalence is introduced and shown to incorporate a large variety of different configurations of uncertainty and central-bank judgment.
"Comment on Brock and Durlauf, 'Local Robustness Analysis: Theory and Applications'," AEA Meeting, Philadelphia, January 2005, overhead slides.
The line: Brock and Durlauf (2004) provides an elegant and compact analysis in the frequency domain of local robust control, but there are many limitations of their method, which makes it less practical.
"Monetary Policy with Judgment: Forecast Targeting," International Journal of Central Banking 1(1) (2005) 1-54, PDF. Abstract. Appendix.
The line: Monetary policy that uses central-bank judgment - information, knowledge, and views outside the scope of a particular model - may perform much better than monetary policy that disregards judgment and follows a simple instrument rule.
"Optimal Policy with Low-Probability Extreme Events," in Macroeconomics, Monetary Policy, and Financial Stability - A Festschrift for Charles Freedman, Proceedings of a conference held by the Bank of Canada, Ottawa, June 2003, 79-104. PDF. Abstract.
"Monetary Policy and Learning," Federal Reserve Bank of Atlanta Economic Review, Third Quarter 2003, 11-16, PDF (109 KB).
Discussion of Francesco Lippi and Stefano Neri, "Information Variables for Monetary Policy in a Small Structural Model of the Euro Area," Workshop on Small Structural Models for Monetary Policy Analysis: Progress, Puzzles, and Opportunities, Sveriges Riksbank, Stockholm, June 6-7, 2003, overhead slides (50 KB).
"Liquidity Traps, Policy Rules for Inflation Targeting, and Eurosystem Monetary-Policy Strategy," research summary, NBER Reporter, Winter 2002/2003, PDF (119 KB). Previous research summary for NBER Reporter, Winter 97/98.
"Optimal Policy with Partial Information in a Forward-Looking Model: Certainty-Equivalence Redux," (with Michael Woodford, Columbia University), June 2002, PDF (204 KB). Abstract.
"Indicator Variables for Optimal Policy under Asymmetric Information," (with Michael Woodford, Columbia University), June 2002, Journal of Economic Dynamics and Control 28 (2004) 661-690, PDF (356 KB). Abstract.
Discusson of Athanasios Orphanides and John C. Williams, "Imperfect Knowledge, Inflation Expectations, and Monetary Policy," Econometric Society North American Winter Meeting, Atlanta, Jan 4-6, 2002, overhead slides (PDF, 56 KB).
"Robust Control Made Simple: Lecture Notes," February 2007, PDF.
"Indicator Variables for Optimal Policy," (with Michael Woodford, Columbia University), Journal of Monetary Economics 50 (2003) 691-720. PDF (334 KB). Abstract.
"Comment on Isard, Laxton and Eliasson, 'Simple Monetary Policy Rules Under Model Uncertainty'," in Peter Isard, Assaf Razin and Andrew Rose, eds. (1999), International Finance and Financial Crises: Essays in Honor of Robert P. Flood, International Monetary Fund, Washington, and Kluwer Academic Publishers, Boston, 251-257, PDF (116 KB).
"Inflation Targeting: Some Extensions," Scandinavian Journal of Economics 101(3) (1999) 337-361.
Inflation targeting: general Top | New
"Inflation Targeting," in Friedman, Benjamin M., and Michael Woodford, eds., Handbook of Monetary Economics, Volume 3b, chapter 22, Elsevier. PDF. Abstract.
The chapter discusses the history, theory, practice, and future of inflation targeting.
"Evaluating Monetary Policy," in Koenig, Evan F., Robert Leeson, and George A. Kahn, eds., The Taylor Rule and the Transformation of Monetary Policy, Hoover Institution Press, 2012, p. 245-274. PDF. Abstract.
The line: With a modified Taylor curve, the forecast Taylor curve, and plots of mean squared gaps showing the tradeoff between the variability of the inflation-gap and output-gap forecasts it is possible to evaluate policy ex ante, that is, taking into account the information available at the time of the policy decisions, and even evaluate policy in real time.
"Anticipated Alternative Instrument-Rate Paths in Policy Simulations" (with Stefan Laséen, Sveriges Riksbank), revised May 2011. Forthcoming in International Journal of Central Banking. PDF. Abstract.
The line: We show how to do policy simulations with alternative arbitrary instrument-rate paths that are anticipated rather than unanticipated as in the method of modest interventions of Leeper and Zha.
"Evaluating Monetary Policy," speech at Uppsala University, March 13, 2009. English, Swedish.
The line: When evaluating a flexible inflation-targeting regime, it is not enough to simply compare the outcome for inflation with the inflation target; it is necessary to evaluate the central bank's decisions primarily on the basis of the information that was available when the decisions were made (ex ante).
"Optimal Monetary Policy," keynote lecture at the Workshop on Optimal Monetary Policy, Norges Bank, November 21-22, 2008, slides.
The line: Optimal monetary policy can in theory be seen as equivalent to choosing an optimal policy function, but it can in practice better be seen as choosing an optimal projection of the instrument rate, inflation, and resource utilization in a set of feasible projections so as to minimize an intertemporal loss functin corresponding to central-bank objectives.
"Monetary Policy Trade-Offs in an Estimated Open-Economy DSGE Model" (with Malin Adolfson and Stefan Laséen, Sveriges Riksbank, and Jesper Lindé, Federal Reserve Board), May 2012, PDF. Abstract.
The line: We examine the transmission of shocks under optimal and other policies in Ramses, the Riksbank's open-economy medium-sized DSGE model for forecasting and policy analysis.
"Transparency under Flexible Inflation Targeting: Experiences and Challenges," Sveriges Riksbank Economic Review 1/2009, 5-44. PDF. Abstract.
The line: Some personal views and reflections on transparency experiences and challenges following my first year as Deputy Governor at Sveriges Riksbank.
"Optimal Monetary Policy in an Operational Medium-Sized DSGE Model" (with Malin Adolfson, Stefan Laséen, and Jesper Lindé, Sveriges Riksbank), July 2010, Journal of Money, Credit and Banking, forthcoming. PDF. Abstract. Technical Appendix. Longer June 2009 version.
The line: We show how to construct optimal policy simulation in Ramses, the Riksbank's open-economy medium-sized DSGE model for forecasting and policy analysis. Optimal policy under commitment fits Riksbank past policy better than simple instrument rule without policy shock.
"What Have Economists Learned about Monetary Policy over the past 50 Years?," in Herrman, Heinz, ed., Monetary Policy Over Fifty Years: Experiences and Lessons, Routledge, 2009. PDF. Press release, September 2008.
The line: A personal view about the research on monetary policy that is most relevant to practical monetary policy, starting with Milton Friedman's Presidential Address in December 1967.
"Inflation Targeting," May 2007, in The New Palgrave Dictionary of Economics, 2nd edition, edited by Larry Blum and Steven Durlauf, forthcoming, PDF.
The line: Inflation targeting was introduced in New Zealand in 1990; has been very successful in terms of stabilizing both inflation and the real economy; has as of 2007 had been adopted by more than 20 industrialized and non-industrialized countries; and is characterized by an announced numerical inflation target, an implementation of monetary policy that gives a major role to an inflation forecast and has been called ‘inflation-forecast targeting’, and a high degree of transparency and accountability.
"Comment on Jeffrey Frankel, 'Commodity Prices and Monetary Policy'," in Campbell, John Y. (ed.), Asset Prices and Monetary Policy, forthcoming, PDF.
"The Role of Science in Best-Practice Monetary Policy: In Honor of Otmar Issing," presented at "Monetary Policy: A Journey from Theory to Practice," an ECB Colloqium held in honor of Otmar Issing in Frankfurt, March 16-17, 2006, PDF. Abstract.
The line: There is a considerable amount of science in current best-practice monetary policy, but a considerable amount of judgment is also needed., which judgment preferably should be used in a systematic and disciplined way.
"The Instrument-Rate Projection under Inflation Targeting: The Norwegian Example," in Stability and Economic Growth: The Role of Central Banks, Banco de Mexico, 2006, 175-198, PDF. Abstract.
The line: By publishing optimal projections of the instrument rate, inflation, and the output gap with uncertainty intervals, together with discussion, alternative scenarios, criteria for optimal projections (targeting rules), and cross-checking with alternative policy rules, Norges Bank (the central bank of Norway) has provided a model in transparent flexible inflation targeting for other central banks.
"The Riksbank Should Learn from Norway" (in Swedish), interview in Dagens Industri, January 14, 2006, PDF.
The line: Substantial progress can be made by inflation-targeting central banks by (1) employing an explicit intertemporal loss function, (2) making explicit decisions on optimal projection paths of the instrument rate, (3) publishing such projections, and (4) incorporating judgment and model uncertainty in a systematic way.
"Monetary Policy with Judgment: Forecast Targeting," International Journal of Central Banking 1(1) (2005) 1-54, PDF. Abstract. Appendix.
The line: Monetary policy that uses central-bank judgment - information, knowledge, and views outside the scope of a particular model - may perform much better than monetary policy that disregards judgment and follows a simple instrument rule.
Comments on Mishkin, Frederic M., "Can Inflation Targeting Work in Emerging Market Countries," Festschrift in Honor of Guillermo A. Calvo, IMF, Washington, DC, April 15 and 16, 2004, overhead slides (50 KB).
"Flexible Inflation Targeting: Principles and Possible Improvements," seminar at Norges Bank (Bank of Norway), Oslo, on March 25, 2004 (shorter version presented at Conference on Monetary Policy, Norges Bank, March 26, 2004), overhead slides (73 KB).
"Interview: Lars Svensson," interview in Central Banking, Vol. XIV, No. 2, November 2003, 51-59, PDF (118 KB).
"Commentary” (on Laurence H. Meyer, “Practical Problems and Obstacles to Inflation Targeting"), Federal Reserve Bank of St. Louis Review 84(4) (July/August 2004) 161-164. PDF.
"Optimal Policy with Low-Probability Extreme Events," in Macroeconomics, Monetary Policy, and Financial Stability - A Festschrift for Charles Freedman, Proceedings of a conference held by the Bank of Canada, Ottawa, June 2003, 79-104. PDF. Abstract.
"Monetary Policy and Learning," Federal Reserve Bank of Atlanta Economic Review, Third Quarter 2003, 11-16, PDF (109 KB).
"Liquidity Traps, Policy Rules for Inflation Targeting, and Eurosystem Monetary-Policy Strategy," research summary, NBER Reporter, Winter 2002/2003, PDF (119 KB). Previous research summary for NBER Reporter, Winter 97/98.
"Implementing Optimal Policy through Inflation-Forecast Targeting," (with Michael Woodford, Columbia University), in Bernanke, Ben S., and Michael Woodford, eds. (2005), The Inflation-Targeting Debate, University of Chicago Press, 19-83. PDF. Abstract.
"An Independent Review of Monetary Policy and Institutions in Norway," by Lars E.O. Svensson (chair) (Princeton University), Kjetil Houg (Alfred Berg), Haakon Solheim (Norwegian School of Management BI) and Erling Steigum (Norwegian School of Management BI), Norges Bank Watch 2002, Centre for Monetary Economics, Norwegian School of Management BI, September 2002.
"Monetary Policy and Real Stabilization," September 2002, in Rethinking Stabilization Policy, A Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 29-31, 2002, 261-312, PDF. Abstract.
"The Inflation Forecast and the Loss Function," in Paul Mizen, ed. (2003), Central Banking, Monetary Theory and Practice: Essays in Honour of Charles Goodhart, Volume I, Edward Elgar, 135-152. PDF (180 KB). Abstract.
"Inflation Targeting: Should It Be Modeled as an Instrument Rule or a Targeting Rule?" European Economic Review 46 (2002) 771-780, PDF (135KB). Abstract.
"What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules," Version 3.1, January 2003, Journal of Economic Literature 41 (2003) 426-477, PDF (619 KB). Abstract.
"Targeting Rules vs. Instrument Rules for Monetary Policy: What Is Wrong with McCallum and Nelson?" Federal Reserve Bank of St. Louis Review 87 (2005) 613-626, PDF. Abstract.
The line: A response to McCallum and Nelson's (2005) paper "Targeting Rules vs. Instrument Rules for Monetary Policy," which criticizes my JEL 2003 article "What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules."
A speech by Ben Bernanke, "The Logic of Monetary Policy," Federal Reserve Board, December 2004, discusses these issue (forecast targeting/targeting rules are called "forecast-based policies" and simple instrument rules are called "simple feedback policies").
"Requiem for Forecast-Based Instrument Rules," April 2001, PDF (149 KB). Abstract.
Discussion of McCallum, "Inflation Targeting and the Liquidity Trap," FRBSF and SIEPR Conference on Asset Prices, Exchange Rates and Monetary Policy, Stanford University, March 2-3, 2001, overhead slides (PDF, 58KB).
"Riksbanken i världsklass" ("The Riksbank in World Class," in Swedish), interview in Dagens Industri, December 12, 2000.
"How Should Monetary Policy Be Conducted in an Era of Price Stability?" in New Challenges for Monetary Policy, a symposium sponsored by the Federal Reserve Bank of Kansas City, held at Jackson Hole, Wyoming, August 26-28, 1999 (IIES Seminar Paper No. 680, CEPR Discussion Paper No. 2342, NBER Working Paper No. 7516), PDF (0.4 MB). Abstract.
"Price Stability as a Target for Monetary Policy: Defining and Maintaining Price Stability," in Deutsche Bundesbank, ed. (2001), The Monetary Transmission Process: Recent Developments and Lessons for Europe, Palgrave, New York, 60-102. (CEPR Discussion Paper No. 2196, NBER Working Paper No. 7276), PDF (0.3 MB). Abstract.
"Policy Rules for Inflation Targeting" (with Glenn Rudebusch, Federal Reserve Bank of San Francisco), in John B. Taylor (ed.), Monetary Policy Rules, University of Chicago Press, 1999. IIES Seminar Paper No. 637, March 1998, (NBER Working Paper No. 6512), PDF (0.4 MB). Abstract.
"Open-Economy Inflation Targeting," Journal of International Economics 50 (2000) 155-183.
"Inflation Targeting as a Monetary Policy Rule," Journal of Monetary Economics 43 (1999) 607-654.
"Inflation Targeting: Some Extensions," Scandinavian Journal of Economics 101(3) (1999) 337-361.
"Inflationsmål i en öppen ekonomi: Strikt eller flexibelt inflationsmål?" ("Inflation Targeting in an Open Economy: Strict or Flexible Inflation Targeting?"), Ekonomisk Debatt 26(6) (1998) 431-439, PDF (0.1 MB).
"Monetary Policy and Inflation Targeting," research summary, NBER Reporter, Winter 1997/8, 5-8, PDF (25 KB). Recent research summary for NBER Reporter, Winter 2002/2003.
"Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," European Economic Review 41 (1997) 1111-1146, PDF (320 KB). Abstract.
"The Swedish Experience of an Inflation Target," in Leonardo Leiderman and Lars E.O. Svensson, eds., Inflation Targets, CEPR, London, 1995.
"Inflation Targets: Introduction" (with Leonardo Leiderman, Tel-Aviv University), in Leonardo Leiderman and Lars E.O. Svensson, eds., Inflation Targets, CEPR, London, 1995.
Inflation Targets (edited with Leonardo Leiderman, Tel Aviv University), CEPR, London, 1995.
"Inflation Targeting," in Friedman, Benjamin M., and Michael Woodford, eds., Handbook of Monetary Economics, Volume 3b, chapter 22, Elsevier. PDF. Abstract.
The chapter discusses the history, theory, practice, and future of inflation targeting.
"Evaluating Monetary Policy," in Koenig, Evan F., Robert Leeson, and George A. Kahn, eds., The Taylor Rule and the Transformation of Monetary Policy, Hoover Institution Press, 2012, p. 245-274. PDF. Abstract.
The line: With a modified Taylor curve, the forecast Taylor curve, and plots of mean squared gaps showing the tradeoff between the variability of the inflation-gap and output-gap forecasts it is possible to evaluate policy ex ante, that is, taking into account the information available at the time of the policy decisions, and even evaluate policy in real time.
"Anticipated Alternative Instrument-Rate Paths in Policy Simulations" (with Stefan Laséen, Sveriges Riksbank), revised May 2011. Forthcoming in International Journal of Central Banking. PDF. Abstract.
The line: We show how to do policy simulations with alternative arbitrary instrument-rate paths that are anticipated rather than unanticipated as in the method of modest interventions of Leeper and Zha.
"Evaluating Monetary Policy," speech at Uppsala University, March 13, 2009. English, Swedish.
The line: When evaluating a flexible inflation-targeting regime, it is not enough to simply compare the outcome for inflation with the inflation target; it is necessary to evaluate the central bank's decisions primarily on the basis of the information that was available when the decisions were made (ex ante).
"Optimal Monetary Policy," keynote lecture at the Workshop on Optimal Monetary Policy, Norges Bank, November 21-22, 2008, slides.
The line: Optimal monetary policy can in theory be seen as equivalent to choosing an optimal policy function, but it can in practice better be seen as choosing an optimal projection of the instrument rate, inflation, and resource utilization in a set of feasible projections so as to minimize an intertemporal loss functin corresponding to central-bank objectives.
"Optimal Monetary Policy in an Operational Medium-Sized DSGE Model" (with Malin Adolfson, Stefan Laséen, and Jesper Lindé, Sveriges Riksbank), July 2010, Journal of Money, Credit and Banking, forthcoming. PDF. Abstract. Technical Appendix. Longer June 2009 version.
The line: We show how to construct optimal policy simulation in Ramses, the Riksbank's open-economy medium-sized DSGE model for forecasting and policy analysis. Optimal policy under commitment fits Riksbank past policy better than simple instrument rule without policy shock.
"What Have Economists Learned about Monetary Policy over the past 50 Years?," in Herrman, Heinz, ed., Monetary Policy Over Fifty Years: Experiences and Lessons, Routledge, 2009. PDF. Press release, September 2008.
The line: A personal view about the research on monetary policy that is most relevant to practical monetary policy, starting with Milton Friedman's Presidential Address in December 1967.
"Inflation Targeting," May 2007, in The New Palgrave Dictionary of Economics, 2nd edition, edited by Larry Blum and Steven Durlauf, forthcoming, PDF.
The line: Inflation targeting was introduced in New Zealand in 1990; has been very successful in terms of stabilizing both inflation and the real economy; has as of 2007 had been adopted by more than 20 industrialized and non-industrialized countries; and is characterized by an announced numerical inflation target, an implementation of monetary policy that gives a major role to an inflation forecast and has been called ‘inflation-forecast targeting’, and a high degree of transparency and accountability.
"Bayesian and Adaptive Optimal Policy under Model Uncertainty" (with Noah Williams, University of Wisconsin), September 2007, PDF. Abstract.
The line: Bayesian optimal policy (which includes both learning and experimentation) in a both general and tractable case of model uncertainty is compared to adaptive optimal policy (which includes learning but excludes experimentation), and the results indicate that optimal experimentation brings only modest gains above the learning under adaptive optimal policy.
"The Role of Science in Best-Practice Monetary Policy: In Honor of Otmar Issing," presented at "Monetary Policy: A Journey from Theory to Practice," an ECB Colloqium held in honor of Otmar Issing in Frankfurt, March 16-17, 2006, PDF. Abstract.
The line: There is a considerable amount of science in current best-practice monetary policy, but a considerable amount of judgment is also needed., which judgment preferably should be used in a systematic and disciplined way.
"The Instrument-Rate Projection under Inflation Targeting: The Norwegian Example," in Stability and Economic Growth: The Role of Central Banks, Banco de Mexico, 2006, 175-198, PDF. Abstract.
The line: By publishing optimal projections of the instrument rate, inflation, and the output gap with uncertainty intervals, together with discussion, alternative scenarios, criteria for optimal projections (targeting rules), and cross-checking with alternative policy rules, Norges Bank (the central bank of Norway) has provided a model in transparent flexible inflation targeting for other central banks.
"The Riksbank Should Learn from Norway" (in Swedish), interview in Dagens Industri, January 14, 2006, PDF.
"Monetary Policy with Model Uncertainty: Distribution Forecast Targeting" (with Noah Williams, University of Wisconsin), May 2007, PDF. Abstract and Matlab programs.
The line: A very flexible, powerful, and yet tractable framework for the analysis and determination of optimal monetary policy under model uncertainty and certainty non-equivalence is introduced and shown to incorporate a large variety of different configurations of uncertainty and central-bank judgment.
The line: Substantial progress can be made by inflation-targeting central banks by (1) employing an explicit intertemporal loss function, (2) making explicit decisions on optimal projection paths of the instrument rate, (3) publishing such projections, and (4) incorporating judgment and model uncertainty in a systematic way.
"Monetary Policy with Judgment: Forecast Targeting," International Journal of Central Banking 1(1) (2005) 1-54, PDF. Abstract. Appendix.
The line: Monetary policy that uses central-bank judgment - information, knowledge, and views outside the scope of a particular model - may perform much better than monetary policy that disregards judgment and follows a simple instrument rule.
"Optimal Policy with Low-Probability Extreme Events," in Macroeconomics, Monetary Policy, and Financial Stability - A Festschrift for Charles Freedman, Proceedings of a conference held by the Bank of Canada, Ottawa, June 2003, 79-104. PDF. Abstract.
"Monetary Policy and Learning," Federal Reserve Bank of Atlanta Economic Review, Third Quarter 2003, 11-16, PDF (109 KB).
"Implementing Optimal Policy through Inflation-Forecast Targeting," (with Michael Woodford, Columbia University), in Bernanke, Ben S., and Michael Woodford, eds. (2005), The Inflation-Targeting Debate, University of Chicago Press, 19-83. PDF. Abstract.
"What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules," Version 3.1, January 2003, Journal of Economic Literature 41 (2003) 426-477, PDF (619 KB). Abstract.
"Targeting Rules vs. Instrument Rules for Monetary Policy: What Is Wrong with McCallum and Nelson?" Federal Reserve Bank of St. Louis Review 87 (2005) 613-626, PDF. Abstract.
The line: A response to McCallum and Nelson's (2005) paper "Targeting Rules vs. Instrument Rules for Monetary Policy," which criticizes my JEL 2003 article "What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules."
A speech by Ben Bernanke, "The Logic of Monetary Policy," Federal Reserve Board, December 2004, discusses these issue (forecast targeting/targeting rules are called "forecast-based policies" and simple instrument rules are called "simple feedback policies").
"An Independent Review of Monetary Policy and Institutions in Norway," by Lars E.O. Svensson (chair) (Princeton University), Kjetil Houg (Alfred Berg), Haakon Solheim (Norwegian School of Management BI) and Erling Steigum (Norwegian School of Management BI), Norges Bank Watch 2002, Centre for Monetary Economics, Norwegian School of Management BI, September 2002.
"Monetary Policy and Real Stabilization," September 2002, in Rethinking Stabilization Policy, A Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 29-31, 2002, 261-312, PDF. Abstract.
"The Inflation Forecast and the Loss Function," in Paul Mizen, ed. (2003), Central Banking, Monetary Theory and Practice: Essays in Honour of Charles Goodhart, Volume I, Edward Elgar, 135-152. PDF (180 KB). Abstract.
"Inflation Targeting: Should It Be Modeled as an Instrument Rule or a Targeting Rule?" European Economic Review 46 (2002) 771-780, PDF (135KB). Abstract.
"Requiem for Forecast-Based Instrument Rules," April 2001, PDF (149 KB). Abstract.
Discussion of McCallum, "Inflation Targeting and the Liquidity Trap," FRBSF and SIEPR Conference on Asset Prices, Exchange Rates and Monetary Policy, Stanford University, March 2-3, 2001, overhead slides (PDF, 58KB).
"How Should Monetary Policy Be Conducted in an Era of Price Stability?" in New Challenges for Monetary Policy, a symposium sponsored by the Federal Reserve Bank of Kansas City, held at Jackson Hole, Wyoming, August 26-28, 1999 (IIES Seminar Paper No. 680, CEPR Discussion Paper No. 2342, NBER Working Paper No. 7516), PDF (0.4 MB). Abstract.
"Price Stability as a Target for Monetary Policy: Defining and Maintaining Price Stability," in Deutsche Bundesbank, ed. (2001), The Monetary Transmission Process: Recent Developments and Lessons for Europe, Palgrave, New York, 60-102. (CEPR Discussion Paper No. 2196, NBER Working Paper No. 7276), PDF (0.3 MB). Abstract.
"Policy Rules for Inflation Targeting" (with Glenn Rudebusch, Federal Reserve Bank of San Francisco), in John B. Taylor (ed.), Monetary Policy Rules, University of Chicago Press, 1999. IIES Seminar Paper No. 637, March 1998, (NBER Working Paper No. 6512), PDF (0.4 MB). Abstract.
"Inflation Targeting as a Monetary Policy Rule," Journal of Monetary Economics 43 (1999) 607-654.
"Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," European Economic Review 41 (1997) 1111-1146, PDF (320 KB). Abstract.
Inflation targeting in open economies Top | New
"Monetary Policy Trade-Offs in an Estimated Open-Economy DSGE Model" (with Malin Adolfson and Stefan Laséen, Sveriges Riksbank, and Jesper Lindé, Federal Reserve Board), May 2012, PDF. Abstract.
The line: We examine the transmission of shocks under optimal and other policies in Ramses, the Riksbank's open-economy medium-sized DSGE model for forecasting and policy analysis.
"Optimal Monetary Policy in an Operational Medium-Sized DSGE Model" (with Malin Adolfson, Stefan Laséen, and Jesper Lindé, Sveriges Riksbank), July 2010, Journal of Money, Credit and Banking, forthcoming. PDF. Abstract. Technical Appendix. Longer June 2009 version.
The line: We show how to construct optimal policy simulation in Ramses, the Riksbank's open-economy medium-sized DSGE model for forecasting and policy analysis. Optimal policy under commitment fits Riksbank past policy better than simple instrument rule without policy shock.
"Current Account Dynamics and Monetary Policy" (with Andrea Ferrero, Federal Reserve Bank of New York, and Mark Gertler, New York University), September 2007, PDF. Abstract.
The line: For different scenarios for U.S.-relevant current-account adjustment in a two-country DSGE model, it is shown that the behavior of domestic variables such as inflation and output is quite sensitive to the monetary policy regime, whereas the behavior of international variables such as the current account and the real exchange rate is less so.
"Comment on Jeffrey Frankel, 'Commodity Prices and Monetary Policy'," in Campbell, John Y. (ed.), Asset Prices and Monetary Policy, forthcoming, PDF.
"Flexible Inflation Targeting: Principles and Possible Improvements," seminar at Norges Bank (Bank of Norway), Oslo, on March 25, 2004 (shorter version presented at Conference on Monetary Policy, Norges Bank, March 26, 2004), overhead slides (73 KB).
"An Independent Review of Monetary Policy and Institutions in Norway," by Lars E.O. Svensson (chair) (Princeton University), Kjetil Houg (Alfred Berg), Haakon Solheim (Norwegian School of Management BI) and Erling Steigum (Norwegian School of Management BI), Norges Bank Watch 2002, Centre for Monetary Economics, Norwegian School of Management BI, September 2002.
"Monetary Policy and Real Stabilization," September 2002, in Rethinking Stabilization Policy, A Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 29-31, 2002, 261-312, PDF. Abstract.
Discussion of Calvo, Celasun and Kumhof, "A Theory of Rational Inflation Inertia," IFM Workshop, NBER Summer Institute, July 16, 2001, overhead slides (PDF, 45KB).
Discussion of Clarida, Gali and Gertler, "Optimal Monetary Policy in Open versus Closed Economies: An Integrated Approach," American Economic Association Annual Meeting, January 5, 2001, overhead slides (PDF, 36 KB).
"Open-Economy Inflation Targeting," Journal of International Economics 50 (2000) 155-183.
"Inflationsmål i en öppen ekonomi: Strikt eller flexibelt inflationsmål?" ("Inflation Targeting in an Open Economy: Strict or Flexible Inflation Targeting?"), Ekonomisk Debatt 26(6) (1998) 431-439, PDF (0.1 MB).
"Inflation Targeting in an Open Economy: Strict or Flexible Inflation Targeting?" Public Lecture held at Victoria University of Wellington, New Zealand, November 18, 1997. Victoria Economic Commentaries 15-1 (March 1998), PDF (55 KB). Also available as RBNZ Discussion paper G97-8.
Monetary policy rules Top | New
"Inflation Targeting," in Friedman, Benjamin M., and Michael Woodford, eds., Handbook of Monetary Economics, Volume 3b, chapter 22, Elsevier. PDF. Abstract.
The chapter discusses the history, theory, practice, and future of inflation targeting.
"Optimal Monetary Policy," keynote lecture at the Workshop on Optimal Monetary Policy, Norges Bank, November 21-22, 2008, slides.
The line: Optimal monetary policy can in theory be seen as equivalent to choosing an optimal policy function, but it can in practice better be seen as choosing an optimal projection of the instrument rate, inflation, and resource utilization in a set of feasible projections so as to minimize an intertemporal loss functin corresponding to central-bank objectives.
"Monetary Policy Trade-Offs in an Estimated Open-Economy DSGE Model" (with Malin Adolfson and Stefan Laséen, Sveriges Riksbank, and Jesper Lindé, Federal Reserve Board), May 2012, PDF. Abstract.
The line: We examine the transmission of shocks under optimal and other policies in Ramses, the Riksbank's open-economy medium-sized DSGE model for forecasting and policy analysis.
"Optimal Monetary Policy in an Operational Medium-Sized DSGE Model" (with Malin Adolfson, Stefan Laséen, and Jesper Lindé, Sveriges Riksbank), July 2010, Journal of Money, Credit and Banking, forthcoming. PDF. Abstract. Technical Appendix. Longer June 2009 version.
The line: We show how to construct optimal policy simulation in Ramses, the Riksbank's open-economy medium-sized DSGE model for forecasting and policy analysis. Optimal policy under commitment fits Riksbank past policy better than simple instrument rule without policy shock.
"What Have Economists Learned about Monetary Policy over the past 50 Years?," in Herrman, Heinz, ed., Monetary Policy Over Fifty Years: Experiences and Lessons, Routledge, 2009. PDF. Press release, September 2008.
The line: A personal view about the research on monetary policy that is most relevant to practical monetary policy, starting with Milton Friedman's Presidential Address in December 1967.
"Current Account Dynamics and Monetary Policy" (with Andrea Ferrero, Federal Reserve Bank of New York, and Mark Gertler, New York University), September 2007, PDF. Abstract.
The line: For different scenarios for U.S.-relevant current-account adjustment in a two-country DSGE model, it is shown that the behavior of domestic variables such as inflation and output is quite sensitive to the monetary policy regime, whereas the behavior of international variables such as the current account and the real exchange rate is less so.
"Bayesian and Adaptive Optimal Policy under Model Uncertainty" (with Noah Williams, University of Wisconsin), September 2007, PDF. Abstract.
The line: Bayesian optimal policy (which includes both learning and experimentation) in a both general and tractable case of model uncertainty is compared to adaptive optimal policy (which includes learning but excludes experimentation), and the results indicate that optimal experimentation brings only modest gains above the learning under adaptive optimal policy.
"Monetary Policy with Model Uncertainty: Distribution Forecast Targeting" (with Noah Williams, University of Wisconsin), May 2007, PDF. Abstract and Matlab programs.
The line: A very flexible, powerful, and yet tractable framework for the analysis and determination of optimal monetary policy under model uncertainty and certainty non-equivalence is introduced and shown to incorporate a large variety of different configurations of uncertainty and central-bank judgment.
The line: Substantial progress can be made by inflation-targeting central banks by (1) employing an explicit intertemporal loss function, (2) making explicit decisions on optimal projection paths of the instrument rate, (3) publishing such projections, and (4) incorporating judgment and model uncertainty in a systematic way.
"Monetary Policy with Judgment: Forecast Targeting," International Journal of Central Banking 1(1) (2005) 1-54, PDF. Abstract. Appendix.
The line: Monetary policy that uses central-bank judgment - information, knowledge, and views outside the scope of a particular model - may perform much better than monetary policy that disregards judgment and follows a simple instrument rule.
"Optimization under Commitment and Discretion, the Recursive Saddlepoint Method, and Targeting Rules and Instrument Rules: Lecture Notes," March 2010, PDF.
The line: Solutions to the stochastic linear-quadratic problem with forward-looking variables under commitment and discretion, now with the practical recursive saddlepoint method of Marcet and Marimon, and compact definitions of instrument rules and targeting rules.
"Monetary Policy and Learning," Federal Reserve Bank of Atlanta Economic Review, Third Quarter 2003, 11-16, PDF (109 KB).
"Liquidity Traps, Policy Rules for Inflation Targeting, and Eurosystem Monetary-Policy Strategy," research summary, NBER Reporter, Winter 2002/2003, PDF (119 KB). Previous research summary for NBER Reporter, Winter 97/98.
"Implementing Optimal Policy through Inflation-Forecast Targeting," (with Michael Woodford, Columbia University), in Bernanke, Ben S., and Michael Woodford, eds., The Inflation-Targeting Debate, University of Chicago Press, 19-83, PDF. Abstract.
"What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules," Version 3.1, January 2003, Journal of Economic Literature 41 (2003) 426-477, PDF (619 KB). Abstract.
"Targeting Rules vs. Instrument Rules for Monetary Policy: What Is Wrong with McCallum and Nelson?" Federal Reserve Bank of St. Louis Review 87 (2005) 613-626, PDF. Abstract.
The line: A response to McCallum and Nelson's (2005) paper "Targeting Rules vs. Instrument Rules for Monetary Policy," which criticizes my JEL 2003 article "What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules."
A speech by Ben Bernanke, "The Logic of Monetary Policy," Federal Reserve Board, December 2004, discusses these issue (forecast targeting/targeting rules are called "forecast-based policies" and simple instrument rules are called "simple feedback policies").
"Monetary Policy and Real Stabilization," September 2002, in Rethinking Stabilization Policy, A Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 29-31, 2002, 261-312, PDF. Abstract.
"The Inflation Forecast and the Loss Function," in Paul Mizen, ed. (2003), Central Banking, Monetary Theory and Practice: Essays in Honour of Charles Goodhart, Volume I, Edward Elgar, 135-152. PDF (180 KB). Abstract.
"Inflation Targeting: Should It Be Modeled as an Instrument Rule or a Targeting Rule?" European Economic Review 46 (2002) 771-780, PDF (135KB). Abstract.
"Requiem for Forecast-Based Instrument Rules," April 2001, PDF (149 KB). Abstract.
"How Should Monetary Policy Be Conducted in an Era of Price Stability?" in New Challenges for Monetary Policy, a symposium sponsored by the Federal Reserve Bank of Kansas City, held at Jackson Hole, Wyoming, August 26-28, 1999 (IIES Seminar Paper No. 680, CEPR Discussion Paper No. 2342, NBER Working Paper No. 7516), PDF (0.4 MB). Abstract.
"Policy Rules for Inflation Targeting" (with Glenn Rudebusch, Federal Reserve Bank of San Francisco), in John B. Taylor (ed.), Monetary Policy Rules, University of Chicago Press, 1999. IIES Seminar Paper No. 637, March 1998, (NBER Working Paper No. 6512), PDF (0.4 MB). Abstract.
"Inflation Targeting as a Monetary Policy Rule," Journal of Monetary Economics 43 (1999) 607-654."Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," European Economic Review 41 (1997) 1111-1146, PDF (320 KB). Abstract.
"Optimal Inflation Targets, 'Conservative' Central banks, and Linear Inflation Contracts," American Economic Review 87 (1997) 98-114. Abstract.
Japan, the Foolproof Way, and liquidity traps Top | New
"Monetary Policy and Financial Markets at the Effective Lower Bound," Journal of Money, Credit and Banking, forthcoming. Revision, June 2010, of speech at the conference Financial Markets and Monetary Policy, Federal Reserve Board, June 4-5, 2009. PDF. Abstract.
"Monetary Policy at the ZLB in the Current Crisis," panel presentation at the conference on Quantitative Approaches to Monetary Policy in Open Economies, Federal Reserve Bank of Atlanta, May 15-16, 2009. PDF.
Interview on SR International-Radio Sweden, February 18, 2009. Listen.
"Monetary Policy with a Zero Interest Rate," speech at SNS, Stockholm, February 17, 2009. PDF.
The line: Central banks have powerful policy options with a zero interest rate and can still stabilize inflation and the real economy.
"Credible Commitment to Optimal Escape from a Liquidity Trap: The Role of the Balance Sheet of an Independent Central Bank" (with Olivier Jeanne, IMF), American Economic Review 97 (2007) 474-490, PDF. Abstract.
The line: A central bank's realistic concern about its capital provides a commitment mechanism that can solve the time-consistency problem associated with the optimal escape from a liquidity trap.
Longer working paper version, PDF, July 2004. Data (Excel file).
"Monetary Policy and Japan’s Liquidity Trap," January 2006, prepared for the ESRI International Conference on Policy Options for Sustainable Economic Growth in Japan, Cabinet Office, Tokyo, September 14, 2005, PDF. Abstract.
The line: Monetary policy in Japan has focused on reducing expectations of future interest rates, but a more effective policy in a liquidity trap is to increase expectations of the future price level. The Foolproof Way is likely to be the most effective policy to do this.
"Comments on Bernanke, Reinhart, and Sack, 'An Empirical Assessment of Monetary Policy Alternatives at the Zero Bound'," presented at the Brookings Panel on Economic Activity, Washington, DC, September 9-10, 2004, revised November 2004, PDF. Abstract.
The line: The Bernanke-Reinhart-Sack paper mostly focuses on alternative policies in a liquidity trap to affect expectations of future interest rates. But the problem in a liquidity trap is rather to raise private-sector expectations of the future price level.
"Challenges for Monetary Policy,'' presented at the meeting of the Bellagio Group of the G10, held at the National Bank of Belgium, Brussels, January 26-27, 2004, PDF (98 KB).
"The Magic of the Exchange Rate: Optimal Escape from a Liquidity Trap in Small and Large Open Economies," Version 1.2, July 2004, PDF. Abstract.
"Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others," Journal of Economic Perspectives 17(4) (Fall 2003) 145-166. PDF (191 KB). Abstract.
Discussion of Alan J. Auerbach and Maurice Obstfeld, "The Case for Open-Market Purchases in a Liquidity Trap," FRBSF and SIEPR Conference on Finance and Macroeconomics, San Francisco, Feb 28-Mar 1, 2003, overhead slides (117 KB).
"Escaping from Deflation and a Liquidity Trap," talk at the Hong Kong Institute for Monetary Research, Hong Kong Monetary Authority, Dec 17, 2002, overhead slides (71 KB).
"Monetary Policy and Real Stabilization," September 2002, in Rethinking Stabilization Policy, A Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 29-31, 2002, 261-312, PDF. Abstract. (Chapt. 4, "The Zero Bound, a Liquidity Trap and Deflation," contains a discussion of the foolproof way.)
"How Japan Can Recover," Personal View, Financial Times, Sep 25, 2001. (A simplified version of the non-technical summary of the Graham Lecture below.)
"The Foolproof Way of Escaping from a Liquidity Trap: Is It Really, and Can It Help Japan?" The Frank D. Graham Memorial Lecture, Princeton University, April 5, 2001. Non-technical summary | Overhead slides (PDF, 79 KB)
"The Zero Bound in an Open Economy: A Foolproof Way of Escaping from a Liquidity Trap," Monetary and Economic Studies 19(S-1), February 2001, 277-312, PDF (185 KB). Abstract. (This is the detailed academic version of the Foolproof Way.)
Discussion of McCallum, "Inflation Targeting and the Liquidity Trap," FRBSF and SIEPR Conference on Asset Prices, Exchange Rates and Monetary Policy, Stanford University, March 2-3, 2001, overhead slides (PDF, 58KB).
Monetary targeting and monetary indicators Top | New
"What Have Economists Learned about Monetary Policy over the past 50 Years?," in Herrman, Heinz, ed., Monetary Policy Over Fifty Years: Experiences and Lessons, Routledge, 2009. PDF. Press release, September 2008.
The line: A personal view about the research on monetary policy that is most relevant to practical monetary policy, starting with Milton Friedman's Presidential Address in December 1967.
"Comment on Edward Nelson, 'The Future of Monetary Aggregates in Monetary Policy Analysis'," Carnegie-Rochester Conference on Public Policy, Pittsburgh, PA, Nov 22-23, 2002, Journal of Monetary Economics 50 (2003) 1061-1070, PDF (149 KB).
"Liquidity Traps, Policy Rules for Inflation Targeting, and Eurosystem Monetary-Policy Strategy," research summary, NBER Reporter, Winter 2002/2003, PDF (119 KB). Previous research summary for NBER Reporter, Winter 97/98.
Discussion of Alvarez, Lucas and Weber, "Interest Rates and Inflation," American Economic Association Annual Meeting, January 5, 2001, overhead slides (PDF, 49 KB).
"Money and Inflation in the Euro Area: A Case for Monetary Indicators?" (with Stefan Gerlach, Hong Kong Monetary Authority), Journal of Monetary Economics 50 (2003) 1649-1672, PDF (384 KB). Abstract. Data (Excel file 22 KB).
"Eurosystem Monetary Targeting: Lessons from U.S. Data," (with Glenn Rudebusch, Federal Reserve Bank of San Francisco), European Economic Review 46 (2002) 417-442, PDF (324 KB). Abstract.
"Does the P* Model Provide Any Rationale for Monetary Targeting?" German Economic Review 1 (February 2000) 69-81. (IIES Seminar Paper No. 671, June 1999, CEPR Discussion Paper No. 2198, NBER Working Paper No. 7178), PDF (156 KB). Abstract.
"Monetary Policy Issues for the Eurosystem," Carnegie-Rochester Conferences Series on Public Policy 51(1) (1999) 79-136.
"Inflation Targeting as a Monetary Policy Rule," Journal of Monetary Economics 43 (1999) 607-654.
"Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," European Economic Review 41 (1997) 1111-1146, PDF (320 KB). Abstract.
Price-level targeting Top | New
"Comments on Bernanke, Reinhart, and Sack, 'An Empirical Assessment of Monetary Policy Alternatives at the Zero Bound'," Brookings Papers on Economic Activity 2004:2, 84-100, PDF. Abstract.
The line: The Bernanke-Reinhart-Sack paper mostly focuses on alternative policies in a liquidity trap to affect expectations of future interest rates. But the problem in a liquidity trap is rather to raise private-sector expectations of the future price level.
"The Foolproof Way of Escaping from a Liquidity Trap: Is It Really, and Can It Help Japan?" The Frank D. Graham Memorial Lecture, Princeton University, April 5, 2001, overhead slides (PDF), text in preparation.
"The Zero Bound in an Open Economy: A Foolproof Way of Escaping from a Liquidity Trap," Monetary and Economic Studies 19(S-1), February 2001, 277-312, PDF. Abstract.
"How Should Monetary Policy Be Conducted in an Era of Price Stability?" (section 2 and appendix A), in New Challenges for Monetary Policy, a symposium sponsored by the Federal Reserve Bank of Kansas City, held at Jackson Hole, Wyoming, August 26-28, 1999 (IIES Seminar Paper No. 680, CEPR Discussion Paper No. 2342, NBER Working Paper No. 7516), PDF (0.4 MB). Abstract.
"Price Level Targeting vs. Inflation Targeting: A Free Lunch?" Journal of Money, Credit and Banking 31 (1999) 277-295.
"Evaluating Monetary Policy," in Koenig, Evan F., Robert Leeson, and George A. Kahn, eds., The Taylor Rule and the Transformation of Monetary Policy, Hoover Institution Press, 2012, p. 245-274. PDF. Abstract.
The line: With a modified Taylor curve, the forecast Taylor curve, and plots of mean squared gaps showing the tradeoff between the variability of the inflation-gap and output-gap forecasts it is possible to evaluate policy ex ante, that is, taking into account the information available at the time of the policy decisions, and even evaluate policy in real time.
"Anticipated Alternative Instrument-Rate Paths in Policy Simulations" (with Stefan Laséen, Sveriges Riksbank), revised May 2011. Forthcoming in International Journal of Central Banking. PDF. Abstract.
The line: We show how to do policy simulations with alternative arbitrary instrument-rate paths that are anticipated rather than unanticipated as in the method of modest interventions of Leeper and Zha.
"Transparency under Flexible Inflation Targeting: Experiences and Challenges," Sveriges Riksbank Economic Review 1/2009, 5-44. PDF. Abstract.
The line: Some personal views and reflections on transparency experiences and challenges following my first year as Deputy Governor at Sveriges Riksbank.
"Comments on Dale, Orphanides, and Österholm, 'Imperfect Central Bank Communication: Information versus Distraction," SNB Research Conference, September 19-20, 2008, slides.
The line: The paper's argument against publishing central-bank forecasts requires the unlikely combination of (1) the central-bank forecast being much worse than the private-sector forecast and (2) the private-sector incorrectly believing the central-bank forecast is much better.
"The Role of Science in Best-Practice Monetary Policy: In Honor of Otmar Issing," presented at "Monetary Policy: A Journey from Theory to Practice," an ECB Colloqium held in honor of Otmar Issing in Frankfurt, March 16-17, 2006, PDF. Abstract.
The line: There is a considerable amount of science in current best-practice monetary policy, but a considerable amount of judgment is also needed., which judgment preferably should be used in a systematic and disciplined way.
"The Instrument-Rate Projection under Inflation Targeting: The Norwegian Example," in Stability and Economic Growth: The Role of Central Banks, Banco de Mexico, 2006, 175-198, PDF. Abstract.
The line: By publishing optimal projections of the instrument rate, inflation, and the output gap with uncertainty intervals, together with discussion, alternative scenarios, criteria for optimal projections (targeting rules), and cross-checking with alternative policy rules, Norges Bank (the central bank of Norway) has provided a model in transparent flexible inflation targeting for other central banks.
"The Riksbank Should Learn from Norway" (in Swedish), interview in Dagens Industri, January 14, 2006, PDF.
"Comments on 'Grading the Federal Open Market Committee’s Communications' by Vincent Reinhart and Brian Sack," presented at the ASSA meeting in Boston, January 7, 2006, slides.
The line: Substantial progress can be made by inflation-targeting central banks by (1) employing an explicit intertemporal loss function, (2) making explicit decisions on optimal projection paths of the instrument rate, (3) publishing such projections, and (4) incorporating judgment and model uncertainty in a systematic way.
"Social Value of Public Information: Morris and Shin (2002) Is Actually Pro Transparency, Not Con," American Economic Review 96 (2006) 448-451, PDF. Abstract.
The line: Morris and Shin's result in their 2002 AER paper has widely been interpreted as an anti-transparency result, but it is actually a pro-transparency result.
"Monetary Policy with Judgment: Forecast Targeting," International Journal of Central Banking 1(1) (2005) 1-54, PDF. Abstract. Appendix.
The line: Monetary policy that uses central-bank judgment - information, knowledge, and views outside the scope of a particular model - may perform much better than monetary policy that disregards judgment and follows a simple instrument rule.
"Comment on Jeffery D. Amato and Hyun Song Shin, 'Public and Private Information in Monetary Policy Models'," revised June 2003, presented at the conference "Monetary Stability, Financial Stability and the Business Cycle," BIS, Basel, Mar 28-29, 2003, PDF (100 KB).
"Monetary Policy and Learning," Federal Reserve Bank of Atlanta Economic Review, Third Quarter 2003, 11-16, PDF (109 KB).
"An Independent Review of Monetary Policy and Institutions in Norway," by Lars E.O. Svensson (chair) (Princeton University), Kjetil Houg (Alfred Berg), Haakon Solheim (Norwegian School of Management BI) and Erling Steigum (Norwegian School of Management BI), Norges Bank Watch 2002, Centre for Monetary Economics, Norwegian School of Management BI, September 2002.
"Monetary Policy and Real Stabilization," September 2002, in Rethinking Stabilization Policy, A Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 29-31, 2002, 261-312, PDF. Abstract.
"The Inflation Forecast and the Loss Function," in Paul Mizen, ed. (2003), Central Banking, Monetary Theory and Practice: Essays in Honour of Charles Goodhart, Volume I, Edward Elgar, 135-152. PDF (180 KB). Abstract.
Discussion of Anne Sibert, "Monetary Policy with Uncertain Central Bank Preferences," presented at ISOM, Dublin, June 8-9, 2001, overhead slides (PDF, 48KB).
Discussion of Blinder, Goodhart, Hildebrand, Lipton and Wyplosz, "How Do Central Banks Talk?" presented at the Third Geneva Conference, Geneva, May 4, 2001, overhead slides (PDF, 30 KB).
"The Equilibrium Degree of Transparency and Control in Monetary Policy" (with Jon Faust, Federal Reserve Board) , Journal of Money, Credit and Banking 34 (2002) 520-539, PDF (231 KB). Abstract.
"Transparency and Credibility: Monetary Policy with Unobservable Goals" (with Jon Faust, Federal Reserve Board), International Economic Review 42 (2001) 369-397, PDF (0.3 MB). Abstract.
"Bristande transparens i ESCBs penningpolitiska strategi" ("Insufficient Transparency in ESCB's Monetary Policy Stratetegy," in Swedish), Europafocus Mars 1999.
The Eurosystem and the ECB Top | New
Briefing papers for the Committee on Economic and Monetary Affairs (ECON) of the European Parliament for the Dialogue with ECB.
"Interview: Lars Svensson," interview in Central Banking, Vol. XIV, No. 2, November 2003, 51-59, PDF (118 KB).
"Sverige, valutaunionen och penningpolitiken" ("Sweden, the EMU, and Monetary Policy," in Swedish), Ekonomisk Debatt 31(4) (2003) 50-52, PDF (68 KB). (The piece is a translation and extension of "Sweden and the Euro," January 2002.)
"Liquidity Traps, Policy Rules for Inflation Targeting, and Eurosystem Monetary-Policy Strategy," research summary, NBER Reporter, Winter 2002/2003, PDF (119 KB). Previous research summary for NBER Reporter, Winter 97/98.
"Possible Improvements of the Eurosystem's Monetary Policy Regime," talk at the Nordic Central Bank Meeting, Mariehamn, Åland, June 25, 2002, overhead slides (PDF, 68 KB).
Discussion of Sebastian Edwards and Igal Magendzo, "A Currency of One's Own? An Empirical Invistigation on Dollarization and Independent Currency Unions," at the Sveriges Riksbank and IIES Conference on Monetary Policy and Financial Markets in an Enlarged EU, Stockholm, May 17-18, 2002, overhead slides (PDF, 59 KB).
Discussion of Frank Smets and Rafael Wouters, "Monetary Policy in an Estimated SDGE Model of the Euro Area," at the conference "Macroeconomic Models for Monetary Policy," Federal Reserve Bank of San Francisco, Mar 1-2, 2002, overhead slides (PDF, 47 KB).
"Two and a Half Years of the Eurosystem," to be presented at the CFS Research Conference on the ECB and Its Watchers III, Frankfurt, June 18, 2001, overhead slides (PDF, 85KB)
"Comments on Gaspar, Peres-Quiros and Sicilia, 'The ECB Monetary Strategy and the Money Market'," Vienna, April 19-20, 2001, PDF (110 KB).
"Money and Inflation in the Euro Area: A Case for Monetary Indicators?" (with Stefan Gerlach, Hong Kong Monetary Authority), Journal of Monetary Economics 50 (2003) 1649-1672, PDF (384 KB). Abstract. Data (Excel file 22 KB).
"Does the P* Model Provide Any Rationale for Monetary Targeting?" German Economic Review 1 (February 2000) 69-81. (IIES Seminar Paper No. 671, June 1999, CEPR Discussion Paper No. 2198, NBER Working Paper No. 7178), PDF (156 KB). Abstract.
"Eurosystem Monetary Targeting: Lessons from U.S. Data," (with Glenn Rudebusch, Federal Reserve Bank of San Francisco), European Economic Review 46 (2002) 417-442, PDF (324 KB). Abstract.
"The First Year of the Eurosystem: Inflation Targeting or Not?" American Economic Review: Papers and Proceedings 90, May 2000, 95-99, PDF (75 KB). Abstract.
"Monetary Policy Issues for the Eurosystem," Carnegie-Rochester Conferences Series on Public Policy 51(1) (1999) 79-136.
"Bristande transparens i ESCBs penningpolitiska strategi" ("Insufficient Transparency in ESCB's Monetary Policy Stratetegy," in Swedish), Europafocus Mars 1999.
Exchange-rate targeting vs. inflation targeting Top | New
"Current Account Dynamics and Monetary Policy" (with Andrea Ferrero, Federal Reserve Bank of New York, and Mark Gertler, New York University), September 2007, PDF. Abstract.
The line: For different scenarios for U.S.-relevant current-account adjustment in a two-country DSGE model, it is shown that the behavior of domestic variables such as inflation and output is quite sensitive to the monetary policy regime, whereas the behavior of international variables such as the current account and the real exchange rate is less so.
"Comment on Jeffrey Frankel, 'Commodity Prices and Monetary Policy'," in Campbell, John Y. (ed.), Asset Prices and Monetary Policy, forthcoming, PDF.
Discussion of Maurice Obstfeld, Jay C. Shambaugh and Alan M. Taylor, "The Trilemma in History: Tradeoffs amonge Exchange Rates, Monetary Policies, and Capital Mobility," NBER International Finance and Macro Program Meeting, Cambridge, MA, Oct 18, 2002, overhead slides (3.2 MB).
"An Independent Review of Monetary Policy and Institutions in Norway," by Lars E.O. Svensson (chair) (Princeton University), Kjetil Houg (Alfred Berg), Haakon Solheim (Norwegian School of Management BI) and Erling Steigum (Norwegian School of Management BI), Norges Bank Watch 2002, Centre for Monetary Economics, Norwegian School of Management BI, September 2002.
"Exchange Rate Target or Inflation Target for Norway?" in Anne Berit Christiansen and Jan Fredrik Qvigstad, eds., Choosing a Monetary Policy Target, Scandinavian University Press (Universitetsforlaget AS), Oslo, 120-138, 1997, PDF (75 KB).
"Växelkursmål eller inflationsmål för Norge?" ("Exchange Rate Target or Inflation Target for Norway?", in Swedish), Ekonomisk Debatt 25(8) (1997) 461-472, PDF (86 KB).
Extracting market expectations from financial instruments Top | New
"Comments on Gaspar, Peres-Quiros and Sicilia, 'The ECB Monetary Strategy and the Money Market'," Vienna, April 19-20, 2001, PDF (110 KB).
"New Techniques to Extract Market Expectations from Financial Instruments" (with Paul Söderlind, Stockholm School of Economics), Journal of Monetary Economics 40(2) (1997) 373-429, PDF (511 KB). Abstract and sample Gauss programs. Download printed article from Journal of Monetary Economics (1.7 MB). Corrections.
"Estimating Forward Interest Rates with the Extended Nelson & Siegel Method," Quarterly Review, Sveriges Riksbank, 1995:3, 13-26, PDF. Abstract. Sample Gauss programs.
"Estimating the Term Structure of Interest Rates for Monetary Policy Analysis," (with Magnus Dahlquist, Stockholm School of Economics), Scandinavian Journal of Economics 98 (1996) 163-183.
"Term, Inflation, and Foreign Exchange Risk Premia: A Unified Treatment," NBER Working Paper No. 4544, November 1993, (IIES Seminar Paper No. 548), PDF. Abstract.
Realignment expectations in fixed exchange-rate regimes Top | New
Discussion of Maurice Obstfeld, Jay C. Shambaugh and Alan M. Taylor, "The Trilemma in History: Tradeoffs amonge Exchange Rates, Monetary Policies, and Capital Mobility," NBER International Finance and Macro Program Meeting, Cambridge, MA, Oct 18, 2002, overhead slides (3.2 MB).
"Macroeconomic and Political Determinants of Realignment Expectations: Some European Evidence" (with Andrew K. Rose, University of California at Berkeley), in Barry Eichengreen, Jerry Frieden and Jürgen von Hagen, eds., Monetary and Fiscal Policy in an Integrated Europe, Springer, Berlin, 1995.
Public debt and inflation incentives Top | New
"Debt, Cash Flow and Inflation Incentives: A Swedish Example" (with Mats Persson and Torsten Persson), in G. Calvo and M. King, eds., The Debt Burden and its Consequences for Monetary Policy, London, Macmillan, 1998, 28-62, PDF (0.3 MB). Abstract.
"Kan man inflatera bort budgetunderskottet?" ("Can One Inflate Away the Budget Deficit?" in Swedish, with Mats Persson and Torsten Persson), in Ekonomisk politik: En vänbok till Assar Lindbeck, SNS, Stockholm, 1995.
Comments, debate, etc. Top | New
"Comment on Michael Woodford, 'Inflation Targeting and Financial Stability',"
Sveriges Riksbank Economic Review, forthcoming.
PDF.
"Comments on Gerlach, Stefan, and Thomas Jordan, 'Tactics and Strategy in
Monetary Policy: Benjamin Friedman's Thinking and the Swiss National Bank',"
given at Recent Developments in Monetary Policy, Fiscal Policy, and
Financial System Design: A Conference Honoring Benjamin M. Friedman,
Federal Reserve Bank of Boston, April 22-23, 2011.
Slides.
"Comments on Chung, Laforte, Reifschneider, and Williams, 'Have We Underestimated the Likelihood and Severity of Zero Lower Bound Events?' at the conference "Monetary Policy at the Zero Lower Bound," Federal Reserve Bank of San Francisco, February 25, 2011, slides.
"Comments on Marvin Goodfriend and Robert G. King, 'The Great Inflation Drift'," The Great Inflation Conference, Woodstock, VT, September 25-27, 2008, PDF. Slides.
"Comments on Dale, Orphanides, and Österholm, 'Imperfect Central Bank Communication: Information versus Distraction," SNB Research Conference, September 19-20, 2008, slides.
The line: The paper's argument against publishing central-bank forecasts requires the unlikely combination of (1) the central-bank forecast being much worse than the private-sector forecast and (2) the private-sector incorrectly believing the central-bank forecast is much better.
Discussion of Roel Beetsma, "A Survey of the Effects of Discretionary Fiscal Policy," presented at the conference on "Fiscal Policy and Labour Market Reforms" in Stockholm, January 29, 2008, slides.
"Inflation Targeting," May 2007, in The New Palgrave Dictionary of Economics, 2nd edition, edited by Larry Blum and Steven Durlauf, forthcoming, PDF.
"Comment on Jeffrey Frankel, 'Commodity Prices and Monetary Policy'," in Campbell, John Y. (ed.), Asset Prices and Monetary Policy, forthcoming, PDF.
"Monetary-Policy Challenges: Monetary-Policy Responses to Oil-Price Changes,'' presented at the meeting of the Bellagio Group of the G10, held at the Federal Reserve Board, Washington, DC, January 13-14, 2006, PDF.
The line: Central banks should respond to oil prices to the extent these impact forecasts of inflation and the output gap, and because this impact is complex, the response will be be complex and cannot be represented by a simple instrument rule.
"The Riksbank Should Learn from Norway" (in Swedish), interview in Dagens Industri, January 14, 2006, PDF.
"Comments on 'Grading the Federal Open Market Committee’s Communications' by Vincent Reinhart and Brian Sack," presented at the ASSA meeting in Boston, January 7, 2006, slides.
"Optimization under Commitment and Discretion, the Recursive Saddlepoint Method, and Targeting Rules and Instrument Rules: Lecture Notes," March 2010, PDF.
The line: Solutions to the stochastic linear-quadratic problem with forward-looking variables under commitment and discretion, now with the practical recursive saddlepoint method of Marcet and Marimon, and compact definitions of instrument rules and targeting rules.
"Comment on Brock and Durlauf, 'Local Robustness Analysis: Theory and Applications'," AEA Meeting, Philadelphia, January 2005, overhead slides.
The line: Brock and Durlauf (2004) provides an elegant and compact analysis in the frequency domain of local robust control, but there are many limitations of their method, which makes it less practical.
"Social Value of Public Information: Morris and Shin (2002) Is Actually Pro Transparency, Not Con," American Economic Review 96 (2006) 448-451, PDF. Abstract.
The line: Morris and Shin's result in their 2002 AER paper has widely been interpreted as an anti-transparency result, but it is actually a pro-transparency result.
"Discussion of Faruqee, Laxton, Muir, and Pesenti, 'Smooth Landing or Crash? Model-based Scenarios of Global Current Account Rebalancing'," presented at the NBER Conference on G7 Current Account Imbalances, Newport, RI, June 2005; to be published in Clarida, Richard, editor, G7 Current Account Imbalances: Sustainability and Adjustment, University of Chicago Press, forthcoming, PDF.
The line: Impressive paper and model, but the authors do not fully utilize the model's potential to a synthesis of and an improvement on recent papers on the US current account.
"Comments on Bernanke, Reinhart, and Sack, 'An Empirical Assessment of Monetary Policy Alternatives at the Zero Bound'," Brookings Papers on Economic Activity 2004:2, 84-100, PDF. Abstract.
The line: The Bernanke-Reinhart-Sack paper mostly focuses on alternative policies in a liquidity trap to affect expectations of future interest rates. But the problem in a liquidity trap is rather to raise private-sector expectations of the future price level.
"Targeting Rules vs. Instrument Rules for Monetary Policy: What Is Wrong with McCallum and Nelson?" Federal Reserve Bank of St. Louis Review 87 (2005) 613-626, PDF. Abstract.
The line: A response to McCallum and Nelson's (2005) paper "Targeting Rules vs. Instrument Rules for Monetary Policy," which criticizes my JEL 2003 article "What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules."
A speech by Ben Bernanke, "The Logic of Monetary Policy," Federal Reserve Board, December 2004, discusses these issue (forecast targeting/targeting rules are called "forecast-based policies" and simple instrument rules are called "simple feedback policies").
Comments on Mishkin, Frederic M., "Can Inflation Targeting Work in Emerging Market Countries," Festschrift in Honor of Guillermo A. Calvo, IMF, Washington, DC, April 15 and 16, 2004, overhead slides (50 KB).
"Reviews of Monetary Policy in New Zealand and Norway," Newsletter, July 2004, Study Center Gerzensee, Gerzensee, Switzerland. PDF (99 KB).
"Challenges for Monetary Policy,'' presented at the meeting of the Bellagio Group of the G10, held at the National Bank of Belgium, Brussels, January 26-27, 2004, PDF (98 KB).
"Interview: Lars Svensson," interview in Central Banking, Vol. XIV, No. 2, November 2003, 51-59, PDF (118 KB).
"Commentary” (on Laurence H. Meyer, “Practical Problems and Obstacles to Inflation Targeting"), Federal Reserve Bank of St. Louis Review 84(4) (July/August 2004) 161-164. PDF.
"Monetary Policy and Learning," Federal Reserve Bank of Atlanta Economic Review, Third Quarter 2003, 11-16, PDF (109 KB).
Discussion of Francesco Lippi and Stefano Neri, "Information Variables for Monetary Policy in a Small Structural Model of the Euro Area," Workshop on Small Structural Models for Monetary Policy Analysis: Progress, Puzzles, and Opportunities, Sveriges Riksbank, Stockholm, June 6-7, 2003, overhead slides (50 KB).
"Sverige, valutaunionen och penningpolitiken" ("Sweden, the EMU, and Monetary Policy," in Swedish), Ekonomisk Debatt 31(4) (2003) 50-52, PDF (68 KB). (The piece is a translation and extension of "Sweden and the Euro," January 2002.)
"Comment on Jeffery D. Amato and Hyun Song Shin, 'Public and Private Information in Monetary Policy Models'," revised June 2003, presented at the conference "Monetary Stability, Financial Stability and the Business Cycle," BIS, Basel, Mar 28-29, 2003, PDF (100 KB).
"Comment on Edward Nelson, 'The Future of Monetary Aggregates in Monetary Policy Analysis'," Carnegie-Rochester Conference on Public Policy, Pittsburgh, PA, Nov 22-23, 2002, Journal of Monetary Economics 50 (2003) 1061-1070, PDF (149 KB).
Discussion of Alan J. Auerbach and Maurice Obstfeld, "The Case for Open-Market Purchases in a Liquidity Trap," FRBSF and SIEPR Conference on Finance and Macroeconomics, San Francisco, Feb 28-Mar 1, 2003, overhead slides (117 KB).
Discussion of Guenther W. Beck and Volker Wieland, "Learning, Stabilization and Credibility: Optimal Monetary Policy in a Changing Economy," AEA Annual Meeting, Washington, Jan 4, 2003, overhead slides (57 KB).
Discussion of Frank Smets and Raf Wouters, "Output Gaps: Theory versus Practice," AEA Annual Meeting, Washington, Jan 4, 2003, overhead slides (57 KB).
Discussion of George W. Evans and Seppo Honkapohja, "Monetary Policy, Expectations and Commitment," AEA Annual Meeting, Washington, Jan 5, 2003, overhead slides (71 KB).
Talk at the Hong Kong Institute for Monetary Research, Hong Kong Monetary Authority, "Escaping from Deflation and a Liquidity Trap," Dec 17, 2002, overhead slides (71 KB).
Discussion of Maurice Obstfeld, Jay C. Shambaugh and Alan M. Taylor, "The Trilemma in History: Tradeoffs amonge Exchange Rates, Monetary Policies, and Capital Mobility," NBER International Finance and Macro Program Meeting, Cambridge, MA, Oct 18, 2002, overhead slides (3.2 MB).
Discussion of Vitor Gaspar and Frank Smets, "Monetary Policy, Price Stability and Output Gap Stabilization," and Justin Wolfers, "Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Wellbeing," at the conference "Stabilizing the Economy: What Roles for Fiscal and Monetary Policy?," July 11, 2002, New York, PDF (160 KB).
"Possible Improvements of the Eurosystem's Monetary Policy Regime," talk at the Nordic Central Bank Meeting, Mariehamn, Åland, June 25, 2002, overhead slides (PDF, 68 KB).
"Comments on Nancy Stokey, 'Rules and Discretion' after Twenty-Five Years," 17th Annual Conference on Macroeconomics, NBER, Cambridge, MA, Apr 5-6, 2002, PDF (143 KB).
Discussion of Sebastian Edwards and Igal Magendzo, "A Currency of One's Own? An Empirical Invistigation on Dollarization and Independent Currency Unions," at the Sveriges Riksbank and IIES Conference on Monetary Policy and Financial Markets in an Enlarged EU, Stockholm, May 17-18, 2002, overhead slides (PDF, 59 KB).
Discussion of Frank Smets and Rafael Wouters, "Monetary Policy in an Estimated SDGE Model of the Euro Area," at the conference "Macroeconomic Models for Monetary Policy," Federal Reserve Bank of San Francisco, Mar 1-2, 2002, overhead slides (PDF, 47 KB).
"Bordering on Abuse," interview (in Swedish) in Dagens Industri, February 15, 2002, on the Riksbank's Governing Board's plan to obey, against the Executive Board's recommendation, the Government's request to hand over 20 bn kronor ($2 bn) of the Riksbank's capital to the Government in order to contribute to the Government's budget.
Discusson of Athanasios Orphanides and John C. Williams, "Imperfect Knowledge, Inflation Expectations, and Monetary Policy," Econometric Society North American Winter Meeting, Atlanta, Jan 4-6, 2002, overhead slides (PDF, 56 KB).
Discussion of Thomas Laubach and John C. Williams, "Measuring the Natural Interest Rate," American Economic Association Annual Meeting, Atlanta, Jan 4-6, 2002, overhead slides (PDF, 51 KB).
Comment on Michael Woodford, "Imperfect Common Knowledge and the Effects of Monetary Policy," in Philippe Aghion, Roman Frydman, Joseph Stiglitz and Michael Woodford, eds., Knowledge, Information and Expectations in Modern Macroeconomics: In Honor of Edmund S. Phelps, Princeton University Press, 2003, 59-63. PDF (88KB).
"How Japan Can Recover," Financial Times, Sep 25, 2001.
Discussion of Calvo, Celasun and Kumhof, "A Theory of Rational Inflation Inertia," IFM Workshop, NBER Summer Institute, July 16, 2001, overhead slides (PDF, 45KB).
"Two and a Half Year of the Eurosystem," to be presented at the CFS Research Conference on the ECB and Its Watchers III, Frankfurt, June 18, 2001, overhead slides (PDF, 85KB).
Discussion of Anne Sibert, "Monetary Policy with Uncertain Central Bank Preferences," presented at ISOM, Dublin, June 8-9, 2001, overhead slides (PDF, 48KB).
Discussion of McCallum, "Inflation Targeting and the Liquidity Trap," FRBSF and SIEPR Conference on Asset Prices, Exchange Rates and Monetary Policy, Stanford University, March 2-3, 2001, overhead slides (PDF, 58KB).
Discussion of Clarida, Gali and Gertler, "Optimal Monetary Policy in Open versus Closed Economies: An Integrated Approach," American Economic Association Annual Meeting, January 5, 2001, overhead slides (PDF, 36 KB).
Discussion of Alvarez, Lucas and Weber, "Interest Rates and Inflation," American Economic Association Annual Meeting, January 5, 2001, overhead slides (PDF, 49 KB).
"Riksbanken i världsklass" ("The Riksbank in World Class," in Swedish), interview in Dagens Industri, December 12, 2000.
"Comment on Charles Wyplosz, 'Do We Know How Low Inflation Should Be?", April 2001, revised version of comments presented at the First ECB Central Banking Conference, Why Price Stability?, Frankfurt, November 2-3, 2000, PDF (84 KB).
"Comments on Athanasios Orphanides, "The Quest for Prosperity without Inflation," NBER Monetary Economics Program Meeting, Cambridge, MA, April 2000, overhead slides.
"Comment on Isard, Laxton and Eliasson, 'Simple Monetary Policy Rules Under Model Uncertainty'," in Peter Isard, Assaf Razin and Andrew Rose, eds. (1999), International Finance and Financial Crises: Essays in Honor of Robert P. Flood, International Monetary Fund, Washington, and Kluwer Academic Publishers, Boston, 251-257, PDF (116 KB).
"Bristande transparens i ESCBs penningpolitiska strategi" ("Insufficient Transparency in ESCB's Monetary Policy Stratetegy," in Swedish), Europeisk Debatt Nr 3/98, December 1998.
"Commentary: How Should Monetary Policy Respond to Shocks While Maintaining Long-Run Price Stability?—Conceptual issues,'' in Achieving Price Stability, a symposium sponsored by the Federal Reserve Bank of Kansas City at Jackson Hole, Wyoming, August 29-31, 1996, PDF (74 KB).
Practical monetary policy | Monetary policy: general | Reviews of monetary policy New Zealand Norway Sweden | Monetary policy under uncertainty | Inflation targeting: general | Inflation-forecast targeting | Inflation targeting in open economies | Monetary-policy rules | Japan, the Foolproof Way, and liquidity traps | Monetary targeting and monetary indicators | Price-level targeting | Transparency | The Eurosystem and the ECB | Exchange-rate targeting vs. inflation targeting | Extracting market expectations from financial instruments | Realignment expectations in fixed exchange-rate regimes | Public debt and inflation incentives | Comments, debate, etc.
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March 01, 2013
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