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How to Weigh Unemployment Relative to Inflation in Monetary Policy?

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  • LARS E.O. SVENSSON

Abstract

The monetary policy mandate for the Federal Reserve and of the Riksbank are essentially the same and boil down to stabilizing inflation around the inflation target and employment or unemployment around a long‐run sustainable rate. The relative weight on stabilizing unemployment or employment versus stabilizing inflation may be close to one. A positive unemployment‐gap forecast normally calls for a positive inflation‐gap forecast.

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  • Lars E.O. Svensson, 2014. "How to Weigh Unemployment Relative to Inflation in Monetary Policy?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(S2), pages 183-188, October.
    • Handle: RePEc:wly:jmoncb:v:46:y:2014:i:s2:p:183-188
    DOI: 10.1111/jmcb.12158
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    References listed on IDEAS

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    1. Christopher J. Erceg & Andrew T. Levin, 2014. "Labor Force Participation and Monetary Policy in the Wake of the Great Recession," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(S2), pages 3-49, October.
    2. Lars E. O. Svensson, 2011. "Practical Monetary Policy: Examples from Sweden and the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 289-352.
    3. Charles L. Evans, 2014. "Mainstream Economic Analysis and the Case for Accommodation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(S2), pages 143-154, October.
    4. Lars E. O. Svensson, 2011. "Practical Monetary Policy: Examples from Sweden and the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, pages 289-352.
    5. Svensson, Lars E.O., 2013. "Some Lessons from Six Years of Practical Inflation Targeting," CEPR Discussion Papers 9756, C.E.P.R. Discussion Papers.
    6. David Miles, 2014. "Inflation, Employment, and Monetary Policy: Objectives and Outcomes in the UK and U.S. Compared," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(S2), pages 155-167, October.
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    Cited by:

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    2. Julia Ratcliffe & Ross Kendall, 2019. "Monetary policy strategy in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 82, pages 1-25, April.
    3. Christie Smith & Omar Aziz, 2019. "Monetary policy objectives- price stability and macro stabilisation," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 82, pages 1-14, April.
    4. Mamatzakis, Emmanuel & Bermpei, Theodora, 2016. "What is the effect of unconventional monetary policy on bank performance?," Journal of International Money and Finance, Elsevier, vol. 67(C), pages 239-263.

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