One characteristic feature of central banks today is that policy decisions are almost exclusively made by a committee rather than by a single policy maker. Another is that central banks are considerably more transparent than they used to be. Together, this has brought to the fore an important...

A financial crisis in one region is a wake-up call for investors in other regions. If the correlation across regional fundamentals is potentially positive but uncertain ex-ante, investors acquire information about this correlation to determine their exposure. Financial contagion can occur in the...

We analyze the performance and robustness of some common simple rules for monetary policy in a New-Keynesian open economy model under different assumptions about the exchange rate model. Adding the exchange rate to an optimized Taylor rule gives only small improvements in terms of economic...

This paper presents a theoretical model of the term structure of interest rates based on the monetary policy decision-making process at modern central banks. Evaluations of explicit expressions for the spot and forward rate curve render several important results: (i) Spot and forward rates are...

The interest in empirical studies of monetary policy has increased in the last decade. The deregulation of financial markets and the increased use of explicit policy rules and targets have made monetary policy more transparent and interesting for economic analysis. This paper demonstrates how a...

In central theories of monetary non-neutrality the Ramsey optimal inflation rate varies between the negative of the real interest rate and zero. This paper explores how the interaction of nominal wage and search and matching frictions affect the policy prescription. We show that adding the...

This paper reports and analyzes the results from a questionnaire sent to all present and former members of the Riksbank’s Executive Board, the monetary policy committee (MPC) of the Swedish central bank. The questions cover a number of issues discussed in the growing literature on monetary...

I compare nominal GDP level targeting to flexible inflation targeting in a small New Keynesian model subject to the zero lower bound on nominal policy rates. First, I study the performance of optimal discretionary policies. I find that, for a standard calibration, inflation targeting under...

We reconsider the role of an inflation conservative central banker in a setting with distortionary taxation. To do so, we assume monetary and fiscal policy are decided by independent authorities that do not abide to past commitments. If the two authorities make policy decisions simultaneously,...

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...