This paper discusses how price stability can be defined and how price stability can be maintained in practice. Some lessons for the Eurosystem are also considered. With regard to defining price stability, the choice between price-level stability and low (including zero) inflation and the...

The term structure of interest rate differentials is derived in a model of a small open economy with a target-zone exchange rate regime. The target zone is modelled as a regulated Brownian motion. The interest rate differentials are computed as the solution to a parabolic partial differential...

I report some personal views and reflections on transparency experiences and transparency challenges following my first year and a half as Deputy Governor at Sveriges Riksbank regarding (1) flexible inflation targeting, (2) the role of transparency in inflation targeting and committee decisions...

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 and unobservable "modes." The form of model uncertainty our framework...

The trade-off between interest rate variability and the width of an exchange rate target zone is examined, using the regulated Brownian motion model of target zones. It is shown that for narrow exchange rate bands, and for reasonable parameter values, the interest rate differential's asymptotic...

A theory of the international trade pattern in risky assets is developed by applying the law of comparative advantage to asset trade. According to this l aw, there is a tendency for a country to import assets that have rela tively high autarky prices. It is examined how autarky prices are aff...

Devaluation expectations for the Swedish krona are estimated for the period 1985 to 1992 using daily data for exchange rates and interest rates. The 90 percent confidence intervals for these estimates obtained by the 'drift-adjustment' method suggested by Giuseppe Bertola and Lars E. O. Svensson...