IDEAS home Printed from https://ideas.repec.org/p/bno/worpap/2006_05.html
   My bibliography  Save this paper

When does an interest rate path “look good”? Criteria for an appropriate future interest rate path

Author

Listed:
  • Jan F. Qvigstad

    (Norges Bank (Central Bank of Norway))

Abstract

Svensson (2004) suggested that a monetary policy committee of a central bank (MPC) should “find an instrument-rate path such that projections of inflation and output gap ‘look good’.” Academic literature on monetary policy gives guidance as to what the words “look good” means. However, there is a need for a translation of the theoretical framework into concrete criteria when an MPC shall evaluate interest rate paths in practice. Six criteria for an appropri-ate interest rate path are presented. In the November 2005 Inflation Report, Norges Bank presented for the first time an optimal interest rate path including a fan chart illustrating the uncertainty of the forecast using these criteria. Ex-amples used in explaining the criteria are drawn from Norwegian experiences.

Suggested Citation

  • Jan F. Qvigstad, 2006. "When does an interest rate path “look good”? Criteria for an appropriate future interest rate path," Working Paper 2006/05, Norges Bank.
  • Handle: RePEc:bno:worpap:2006_05
    as

    Download full text from publisher

    File URL: http://www.norges-bank.no/globalassets/upload/import/publikasjoner/arbeidsnotater/pdf/arb-2006-05.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Glenn D. Rudebusch, 2006. "Monetary Policy Inertia: Fact or Fiction?," International Journal of Central Banking, International Journal of Central Banking, vol. 2(4), December.
    2. Orphanides, Athanasios & Porter, Richard D. & Reifschneider, David & Tetlow, Robert & Finan, Frederico, 2000. "Errors in the measurement of the output gap and the design of monetary policy," Journal of Economics and Business, Elsevier, vol. 52(1-2), pages 117-141.
    3. Jon Faust & Dale W. Henderson, 2004. "Is inflation targeting best-practice monetary policy?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 117-144.
    4. Goodhart, Charles, 2005. "The interest rate conditioning assumption," LSE Research Online Documents on Economics 24666, London School of Economics and Political Science, LSE Library.
    5. Charles Goodhart, 2005. "The Interest Rate Conditioning Assumption," FMG Discussion Papers dp547, Financial Markets Group.
    6. Soderstrom, Ulf, 2002. " Monetary Policy with Uncertain Parameters," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(1), pages 125-145.
    7. Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608, November.
    8. Kenneth N Kuttner, 2004. "A Snapshot of Inflation Targeting in its Adolescence," RBA Annual Conference Volume,in: Christopher Kent & Simon Guttmann (ed.), The Future of Inflation Targeting Reserve Bank of Australia.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Carl Walsh, 2014. "Multiple Objectives and Central Bank Tradeoffs under Flexible Inflation Targeting," CESifo Working Paper Series 5097, CESifo Group Munich.
    2. Michael Woodford, 2012. "Forecast Targeting as a Monetary Policy Strategy - Policy Rules in Practice," Book Chapters,in: Evan F. Koenig & Robert Leeson & George A. Kahn (ed.), The Taylor Rule and the Transformation of Monetary Policy, chapter 9 Hoover Institution, Stanford University.

    More about this item

    Keywords

    Forecasts; flexible inflation targeting; optimal monetary policy;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bno:worpap:2006_05. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: () or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/nbgovno.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.