This paper is a brief evaluation of the Eurosystem's monetary-policy regime after its first year, in particular of the extent to which it is similar to inflation targeting as practiced by an increasing number of central banks. I examine the Eurosystem's goals, framework for monetary-policy...

We examine optimal and other monetary policies in a linear-quadratic setup with a relatively general form of model uncertainty, so-called Markov jump-linear-quadratic systems extended to include forward-looking variables. The form of model uncertainty our framework encompasses includes: simple...

Previous analysis of the implementation of inflation targeting is extended to monetary policy responses to different shocks, consequences of model uncertainty, effects of interest rate smoothing and stabilization, a comparison with nominal GDP targeting, and implications of forward-looking...

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...

Most recent research on monetary-policy rules is restricted to considering a commitment to simple instrument rules, where the central-bank instrument is a simple function of available information about the economy, like the Taylor rule. However, a commitment to a simple instrument rule appears...

Monetary policy can achieve average inflation equal to a given inflation target and, at best, a good compromise between inflation variability and output-gap variability. The complex transmission mechanism, varying lags and strength of the effects through different channels, unpredictable shocks...

The introduction of inflation targeting has led to major progress in practical monetary policy. Recent debate has focused on the interest-rate assumption underlying published projections of inflation and other target variables. This paper discusses the role of alternative interest-rate paths in...

If inflation expectations become firmly anchored at the inflation target even when average inflation deviates from the target, the long-run Phillips curve becomes non-vertical. During 1997-2011, average inflation expectations in Sweden have been close to the inflation target of 2 percent,...

Evaluating inflation-targeting monetary policy is more complicated than checking whether inflation has been on target, because inflation control is imperfect and flexible inflation targeting means that deviations from target may be deliberate in order to stabilize the real economy. A modified...

Should inflation targeting involve some leaning against the wind? Sweden provides a case study, since the Riksbank has been leaning against the wind since 2010, stating concerns about risks associated with the household debt-to-income ratio. The cost of this policy in terms of low inflation and...