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Monetary policy analysis and inflation targeting in a small open economy: a VAR approach

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Author Info

  • Tor Jacobson

    (Sveriges Riksbank, 103 37 Stockholm, Sweden)

  • Per Jansson

    (Sveriges Riksbank, 103 37 Stockholm, Sweden)

  • Anders Vredin

    (Sveriges Riksbank, 103 37 Stockholm, Sweden)

  • Anders Warne

    (Sveriges Riksbank, 103 37 Stockholm, Sweden)

Abstract

Empirical monetary policy research has increased in the last decade, possibly because deregulation and explicit monetary targets have made monetary policy issues more interesting. In particular, within the inflation targeting framework it has been argued that inflation forecasts can be used as optimal intermediate targets for monetary policy, and the development of empirical models that have good forecasting properties is therefore important. This paper shows that a VAR model with long-run restrictions, justified by economic theory, is useful for both forecasting inflation and for analysing other issues that are central to the conduct of monetary policy. Copyright © 2001 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 16 (2001)
Issue (Month): 4 ()
Pages: 487-520

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Handle: RePEc:jae:japmet:v:16:y:2001:i:4:p:487-520

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  1. Svensson, Lars E.O., 1998. "Inflation Targeting as a Monetary Policy Rule," Seminar Papers 646, Stockholm University, Institute for International Economic Studies.
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  5. Gunnar Bårdsen & Eilev S. Jansen & Ragnar Nymoen, 1999. "Econometric Inflation Targeting," Working Paper Series 0502, Department of Economics, Norwegian University of Science and Technology, revised 30 Oct 2001.
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  7. David B. Gordon & Eric M. Leeper, 1993. "The dynamic impacts of monetary policy: an exercise in tentative identification," Working Paper 93-5, Federal Reserve Bank of Atlanta.
  8. Svensson, L.E.O., 1998. "Open-Economy Inflation Targeting," Papers 638, Stockholm - International Economic Studies.
  9. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, October.
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  16. P.J.G. Vlaar & H. Schuberth, 1999. "Monetary Transmission and Controllability of Money in Europe: aStructural Vector Error Correction Approach," DNB Staff Reports (discontinued) 36, Netherlands Central Bank.
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  18. Marco Lippi & Lucrezia Reichlin, 1993. "The dynamic effects of aggregate demand and supply disturbances: comment," ULB Institutional Repository 2013/10159, ULB -- Universite Libre de Bruxelles.
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  22. Jacobson, Tor & Jansson, Per & Vredin, Anders & Warne, Anders, 1999. "A VAR Model for Monetary Policy Analysis in a Small Open Economy," Working Paper Series 77, Sveriges Riksbank (Central Bank of Sweden).
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