We analyze the influence of the Taylor rule on US monetary policy by estimating the policy preferences of the Fed within a DSGE framework. The policy preferences are represented by a standard loss function, extended with a term that represents the degree of reluctance to letting the interest...

Modern central banks do not only announce the interest rate decision, they also communicate a "story" that explains why they reached the particular decision. When decisions are made by a committee, it could be difficult to find a story that is both consistent with the decision and representative...

Monetary policy makers often seem to have preferences for a stable interest rate, in addition to stable inflation and output. In this paper we investigate the implications of having an interest rate level term in the loss function when the policymaker lacks commitment technology. We show that...

The paper provides a simple analytical framework for analyzing the interplay between monetary policy and macroprudential policy. Three questions are analyzed: (i) Under which assumptions is coordination necessary to implement an optimal policy mix? (ii) Are the two policy instruments substitutes...

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...

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...

We analyze the influence of the Taylor rule on US monetary policy by estimating the policy preferences of the Fed within a DSGE framework. The policy preferences are represented by a standard loss function, extended with a term that represents the degree of reluctance to letting the interest...

There are two main approaches to modelling monetary policy; simple instrument rules and optimal policy. We propose an alternative that combines the two by extending the loss function with a term penalizing deviations from a simple rule. We analyze the properties of the modified loss function by...