Search Results
Conference Paper
Monetary policy and real stabilization
Conference Paper
Monetary policy issues for the Eurosystem
Working Paper
Optimal policy projections
We outline a method to provide advice on optimal monetary policy while taking policymakers' judgment into account. The method constructs optimal policy projections (OPPs) by extracting the judgment terms that allow a model, such as the Federal Reserve Board staff economic model, FRB/US, to reproduce a forecast, such as the Greenbook forecast. Given an intertemporal loss function that represents monetary policy objectives, OPPs are the projections---of target variables, instruments, and other variables of interest---that minimize that loss function for given judgment terms. The method is ...
Working Paper
Expected and predicted realignments: the FF/DM exchange rate during the EMS
An empirical model of time-varying realignment risk in an exchange rate target zone is developed. Expected rates of devaluation are estimated as the difference between interest rate differentials and estimated expected rates of depreciation within the exchange rate band, using French Franc/Deutsche Mark data during the European Monetary System. The behavior of estimated expected rates of depreciation accord well with the theoretical model of Bertola-Svensson (1990). We are also able to predict actual realignments with some success.
Working Paper
Optimal monetary policy in an operational medium-sized DSGE model
We show how to construct optimal policy projections in Ramses, the Riksbank's open-economy medium-sized DSGE model for forecasting and policy analysis. Bayesian estimation of the parameters of the model indicates that they are relatively invariant to alternative policy assumptions and supports our view that the model parameters may be regarded as unaffected by the monetary policy specification. We discuss how monetary policy, and in particular the choice of output gap measure, affects the transmission of shocks. Finally, we use the model to assess the recent Great Recession in the world ...
Conference Paper
Monetary policy after the crisis
Working Paper
Policy rules for inflation targeting
Policy rules that are consistent with inflation targeting are examined in a small macroeconometric model of the US economy. We compare the properties and outcomes of explicit "instrument rules" as well as "targeting rules." The latter, which imply implicit instrument rules, may be closer to actual operating procedures of inflation-targeting central banks. We find that inflation forecasts are central for good policy rules under inflation targeting. Some simple instrumental and targeting rules do remarkably well relative to the optimal rule; others, including some that are often used as ...
Journal Article
Monetary policy and learning
A new strand of macroeconomic literature examines the relationship between learning and monetary policy-how monetary policymakers learn about the economy as they try to achieve their goals, how the public learns about policymakers' objectives, and how the public's learning, in turn, changes the way monetary policy works. An Atlanta Fed conference in March 2003 brought together some of the main contributors to this emerging literature. ; In the conference keynote address, reprinted here, Lars Svensson focused on what constitutes good monetary policy and how it is related to central-bank ...
Working Paper
The equilibrium degree of transparency and control in monetary policy
We examine a central bank's endogenous choice of degree of control and degree of transparency, under both commitment and discretion. Under commitment, we find that the deliberate choice of sloppy control is far less likely under a standard central-bank loss function than reported for a less-standard loss function by Cukierman and Meltzer. Under discretion, the maximum degree of control is the only equilibrium. With regard to the degree of transparency, under commitment, a sufficiently patient bank with sufficiently low average inflation bias will always choose minimum transparency. Under ...