We investigate whether there is a case for asset prices in interest rates rules within a small econometric model of the Norwegian economy, modeling the interdependence of the real economy, credit and three classes of assets prices: housing prices, equity prices and the nominal exchange rate. We...

We investigate empirically whether a central bank can promote financial stability by stabilising inflation and output, and whether additional stabilisation of asset prices and credit growth would enhance financial stability, in particular. We employ an econometric model of the Norwegian economy...

We evaluate two main views on pursuing financial stability within a flexible inflation targeting regime. It appears that potential gains from an activist or precautionary approach to promoting financial stability are highly shock dependent. We find support for the conventional view that concern...

The time-varying natural rate of interest and output and the implied mediumterm inflation target for the US economy are estimated over the period 1983-2005. The estimation is conducted within the New-Keynesian framework using Bayesian and Kalman-filter estimation techniques. With the...

We investigate optimal horizons for targeting inflation in response to different shocks and their properties under alternative preferences of an inflation-targeting central bank. Our analysis is based on a well specified macroeconometric model of Norway, but we examine how alternative...

With sticky prices, optimizing agents and money in the utility function, I derive the exact analytical solution for optimal monetary policy given a zero lower bound (ZLB) on the interest rate. The Phillips curve is Neo-Classical, and the ZLB is then not a constraint on optimal policy. Optimal...

We employ information-gap decision theory to derive a robust monetary policy response to Knightian parameter uncertainty. This approach provides a quantitative answer to the question: For a specified policy, how much can our models and data err or vary, without rendering the outcome of that...

We consider standard monetary-policy rules with inflation-rate targets and interest-rate or money-growth instruments using a flexible-price, perfect-foresight model. There is always a locally-unique target equilibrium. There are also below-target equilibria (BTE) with inflation always below...

We investigate the importance of employing a valid model for monetary policy analysis. Specifically, we investigate the economic significance of differences in specification and empirical validity of models. We consider three alternative econometric models of wage and price inflation in Norway....

What are the consequences for monetary policy design implied by the fact that price setting and investment takes typically place simultaneously at the firm level? To address this question we analyze simple (constrained) optimal interest rate rules in the context of a dynamic New Keynesian model...