This staff memo revisits the power of forward guidance with particular emphasis on the effectiveness of anticipated policy in Norges Bank's main policy model NEMO. First we explain, within the context of a simple toy model, why and how forward guidance has implausible effects in standard...

The neutral real rate of interest (r*) is a key variable for assessing the tightness of monetary policy. The neutral real interest rate has by all accounts fallen substantially over the past three decades, amid slowing productivity growth, an ageing population, increased inequality and increased...

This paper describes NEMO, the main dynamic stochastic general equilibrium model used at Norges Bank for monetary policy analysis and forecasting. NEMO has been used to identify the sources of business cycle fluctuations in Norway, to conduct scenario analysis, to produce macroeconomic...

We quantify the short-term effects of both non-systematic and systematic monetary policy on the income and wealth distribution in Norway, and measure the relative importance of the various channels. An expansionary monetary policy shock is found to disproportionally benefit the young as well as...

We develop a theory for the optimal interaction between monetary and fiscal policy. While one might initially think that monetary and fiscal policy should pull in the same direction, we show within a simple model that this is not always the case. If there are small costs of changing the interest...

This note outlines a small, calibrated macromodel that can be used to support inflation targeting at Norges Bank. The model provides a stylised representation of the key flows in the macro economy, with a particular emphasis on the transmission mechanism of monetary policy. It can be viewed as...

The interest rate forecast plays a key role in the communication of monetary policy in Norges Bank. We give a comprehensive overview of the Bank's communication with focus on the interest rate forecast. The main arguments for publishing the interest rate forecast are discussed. The arguments are...

Norges Bank is one of few central banks publishing an interest rate fore- cast. This paper discusses how we derive and communicate the interest rate forecast. To produce the forecasts, the Bank uses a medium-sized small open economy DSGE model - NEMO. Judgments and information from other sources...