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The Instrument-Rate Projection under Inflation Targeting: The Norwegian Example

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  • Lars E.O. Svensson

    (Princeton University, CEPR, and NBER)

Abstract

The introduction of inflation targeting has led to major progress in practical monetary policy. Recent debate has focused on the interest-rate assumption underlying published projections of inflation and other target variables. This paper discusses the role of alternative interest-rate paths in the monetary-policy decision process and the recent publication by Norges Bank (the central bank of Norway) of optimal interest-rate projections with fan charts.

Suggested Citation

  • Lars E.O. Svensson, 2006. "The Instrument-Rate Projection under Inflation Targeting: The Norwegian Example," Working Papers 75, Princeton University, Department of Economics, Center for Economic Policy Studies..
    • Handle: RePEc:pri:cepsud:127
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    File URL: https://gceps.princeton.edu/wp-content/uploads/2017/01/127svensson.pdf
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Galí, Jordi, 2011. "Are central banks' projections meaningful?," Journal of Monetary Economics, Elsevier, vol. 58(6), pages 537-550.
    2. Carlo Rosa & Giovanni Verga, 2006. "The Impact of Central Bank Announcements on Asset Prices in Real Time: Testing the Efficiency of the Euribor Futures Market," CEP Discussion Papers dp0764, Centre for Economic Performance, LSE.
    3. Malte Knüppel & Guido Schultefrankenfeld, 2017. "Interest rate assumptions and predictive accuracy of central bank forecasts," Empirical Economics, Springer, vol. 53(1), pages 195-215, August.
    4. Westelius, Niklas J., 2009. "Imperfect transparency and shifts in the central bank's output gap target," Journal of Economic Dynamics and Control, Elsevier, vol. 33(4), pages 985-996, April.
    5. Richhild Moessner & David-Jan Jansen & Jakob de Haan, 2017. "Communication About Future Policy Rates In Theory And Practice: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(3), pages 678-711, July.
    6. Alessandro Flamini, 2012. "Interest Rate Forecasts in Inflation Targeting Open-Economies," Economia politica, Società editrice il Mulino, issue 3, pages 381-408.
    7. Monica Jain & Christopher S. Sutherland, 2020. "How Do Central Bank Projections and Forward Guidance Influence Private-Sector Forecasts?," International Journal of Central Banking, International Journal of Central Banking, vol. 16(5), pages 179-218, October.
    8. Stenfors, Alexis, 2014. "LIBOR deception and central bank forward (mis-)guidance: Evidence from Norway during 2007–2011," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 32(C), pages 452-472.
    9. Karolina TURA-GAWRON, 2018. "Inflation Forecast or Forecast(s) Targeting?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 42-56, September.
    10. Lars E.O. Svensson, 2014. "Forward Guidance," NBER Working Papers 20796, National Bureau of Economic Research, Inc.
    11. repec:pri:cepsud:129blinder is not listed on IDEAS
    12. Guido Schultefrankenfeld, 2020. "Appropriate monetary policy and forecast disagreement at the FOMC," Empirical Economics, Springer, vol. 58(1), pages 223-255, January.
    13. Buiter, Willem, 2006. "How Robust is the New Conventional Wisdom? The Surprising Fragility of the Theoretical Foundations of Inflation Targeting and C," CEPR Discussion Papers 5772, C.E.P.R. Discussion Papers.
    14. Alan S. Blinder, 2006. "Monetary Policy Today: Sixteen Questions and about Twelve Answers," Working Papers 73, Princeton University, Department of Economics, Center for Economic Policy Studies..
    15. Richhild Moessner & David-Jan Jansen & Jakob de Haan, 2017. "Communication About Future Policy Rates In Theory And Practice: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(3), pages 678-711, July.
    16. Lars Winkelmann, 2013. "Quantitative forward guidance and the predictability of monetary policy - A wavelet based jump detection approach -," SFB 649 Discussion Papers SFB649DP2013-016, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    17. Alexis Stenfors, 2014. "The Swedish Financial System," FESSUD studies fstudy13, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    18. Marc-André Gosselin, 2007. "Central Bank Performance under Inflation Targeting," Staff Working Papers 07-18, Bank of Canada.
    19. repec:gdk:wpaper:38 is not listed on IDEAS
    20. Alan S. Blinder, 2006. "Monetary Policy Today: Sixteen Questions and about Twelve Answers," Working Papers 73, Princeton University, Department of Economics, Center for Economic Policy Studies..

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    More about this item

    Keywords

    Forecasts; flexible inflation targeting; optimal monetary policy; Norway;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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