“Monetary policy and macroprudential policy: Different and separate,” paper (revised November 2015) and slides presented at the conference “Macroprudential monetary policy,” Federal Reserve Bank of Boston’s 59th Economic Conference, Federal Reserve Bank of Boston, October 2-3, 2015.
Excel sheet used in slide 21 for the simple example of a cost-benefit analys of leaning against the wind.


Forward Guidance,” International Journal of Central Banking 11 (September 2015), Supplement 1, 19-64. AbstractPaper.

Appendix: Slides for Sweden Feb 2007-Sep 2014, New Zealand Mar 2004-Mar 2014, U.S. Jan 2012-Mar 2015.

Inflation Targeting and Leading Against the Wind,” South African Reserve Bank (2015), Fourteen Years of Inflation Targeting in South Africa and the Challenge of a Changing Mandate: South African Reserve Bank Conference Proceedings 2014. Pretoria: South African Reserve Bank, 19-36. Abstract. PaperSlides.
A previous version, Why Leaning Against the Wind Is the Wrong Monetary Policy for Sweden,” was presented at the NBER 25th Annual East Asian Seminar on Economics, Unconventional Monetary Policy, Tokyo, June 20-21, 2014.
A shorter version, “Inflation Targeting and Leaning Against the Wind,” is published in International Journal of Central Banking (June 2014)  103-114.

Riksbanken, måluppfyllelsen och den demokratiska kontrollen” (“The Riksbank, the target achievement, and the democratic control,” in Swedish), Ekonomisk Debatt 4/2014, 54-66.

“De senaste årens penningpolitik – ‘leaning against the wind’ ” (“Monetary policy during the last few years – leaning against the wind,” in Swedish), Ekonomisk Debatt 3/2014, 6-24. Paper.

“Resilience, Debt, and Net Worth: Has Resilience Increased with Higher Debt-to-Income Ratios?” January 2014. Paper.

”’Leaning against the wind’ increases (not reduces) the household debt-to-GDP ratio,” revised November 2013. Paper.

“The Effect of Housing Prices of Changes in Mortgage Rates and Taxes,” August 2013. Paper.

Some Lessons from Six Years of Practical Inflation Targeting,” Sveriges Riksbank Economic Review 2013:3, 29-80.

“The Possible Unemployment Cost of Average Inflation below a Credible Target,” American Economic Journal: Macroeconomics 7(1) (2015) 258-296. PaperAbstract. Data and programs.

“Practical Monetary Policy: Examples from Sweden and the United States,” Brookings Papers on Economic Activity, Fall 2011, 289-332. PaperAbstractAppendixData for figures (Excel).

Unemployment Gaps: Notes on Blanchard and Gali (2010),” research notes, July 2012.

“Inflation Targeting,” in Friedman, Benjamin M., and Michael Woodford, eds., Handbook of Monetary Economics, Volume 3B, chapter 22, Elsevier 2010. PaperAbstract.

The line: The chapter discusses the history, theory, practice, and future of inflation targeting.

 “Evaluating Monetary Policy,”  in Koenig, Evan F., Robert Leeson, and George A. Kahn, eds., The Taylor Rule and the Transformation of Monetary Policy, Hoover Institution Press, 2012, p. 245-274 (revision and update of speech on March 13, 2009). Paper.Abstract.

The line: With a modified Taylor curve, the forecast Taylor curve, and plots of mean squared gaps showing the tradeoff between the variability of the inflation-gap and output-gap forecasts it is possible to evaluate policy ex ante, that is, taking into account the information available at the time of the policy decisions, and even evaluate policy in real time.

“Anticipated Alternative Instrument-Rate Paths in Policy Simulations” (with Stefan Laséen, Sveriges Riksbank), revised May 2011.  International Journal of Central Banking 7(3) (2011) 1-35.  PDFAbstract.

The line: We demonstrate a simple algorithm to do policy simulations with alternative arbitrary instrument-rate paths that are anticipated rather than unanticipated as in the method of modest interventions of Leeper and Zha.

“Optimal Monetary Policy in an Operational Medium-Sized DSGE Model” (with Malin Adolfson, Stefan Laséen, and Jesper Lindé, Sveriges Riksbank), Journal of Money, Credit and Banking  43 (2011) 1287-1331. PaperAbstractTechnical AppendixLonger June 2009 version.

The line: We show how to construct optimal policy simulation in Ramses, the Riksbank’s open-economy medium-sized DSGE model for forecasting and policy analysis.  Optimal policy under commitment fits Riksbank past policy better than simple instrument rule without policy shock.

“Monetary Policy Trade-Offs in an Estimated Open-Economy DSGE Model” (with Malin Adolfson and Stefan Laséen, Sveriges Riksbank, and Jesper Lindé, Federal Reserve Board), February 2014, Journal of Economic Dynamics and Control, forthcoming. PaperAbstract.
Matlab code. Instructions for running the code.

The line: We examine the transmission of shocks under optimal and other policies in Ramses, the Riksbank’s open-economy medium-sized DSGE model for forecasting and policy analysis.

“Optimization under Commitment and Discretion, the Recursive Saddlepoint Method, and Targeting Rules and Instrument Rules: Lecture Notes,” March 2010, PDF.

“Optimal Monetary Policy under Uncertainty: A Markov Jump-Linear-Quadratic Approach” (with Noah Williams, University of Wisconsin), Federal Reserve Bank of St. Louis Review 90(4), 2008, 275-293. PDFAbstract.

The line: We use a Markov jump-linear-quadratic (MJLQ) approach to analyze how policy is affected by uncertainty, learning, and experimentation,finding that learning may have sizeable effects on losses and need not always be beneficial, whereas the experimentation component typically has little effect and can in some cases lead to attenuation of policy.

“Optimal Monetary Policy under Uncertainty in DSGE Models: A Markov Jump-Linear-Quadratic Approach” (with Noah Williams, University of Wisconsin), in Schmidt-Hebbel, Klaus, and Carle E. Walsh (eds.) (2009), Monetary Policy under Uncertainty and Learning, Central Bank of Chile. PDFAbstract.

The line: We use a Markov jump-linear-quadratic (MJLQ) approach to a benchmark New Keynesian model, analyzing how policy is affected by uncertainty, and how learning and active experimentation affect policy and losses.

“What Have Economists Learned about Monetary Policy over the past 50 Years?,” in Herrman, Heinz, ed., Monetary Policy Over Fifty Years: Experiences and Lessons, Routledge, 2009. PDF.

The line: A personal view about the research on monetary policy that is most relevant to practical monetary policy, starting with Milton Friedman’s Presidential Address in December 1967.

“Current Account Dynamics and Monetary Policy” (with Andrea Ferrero, Federal Reserve Bank of New York, and Mark Gertler, New York University), in Gali, Jordi, and Mark Gertler (eds.), International Dimensions of Monetary Policy, Chicago University Press, 2009, PDFAbstract

The line: For different scenarios for U.S.-relevant current-account adjustment in a two-country DSGE model, it is shown that the behavior of domestic variables such as inflation and output is quite sensitive to the monetary policy regime, whereas the behavior of international variables such as the current account and the real exchange rate is less so.

“Bayesian and Adaptive Optimal Policy under Model Uncertainty” (with Noah Williams, University of Wisconsin), September 2007, PDFAbstract.

The line: Bayesian optimal policy (which includes both learning and experimentation) in a both general and tractable case of model uncertainty is compared to adaptive optimal policy (which includes learning but excludes experimentation), and the results indicate that optimal experimentation brings only modest gains above the learning under adaptive optimal policy.

“Monetary Policy with Model Uncertainty: Distribution Forecast Targeting” (with Noah Williams, University of Wisconsin), May 2007, PDFAbstract and Matlab programs.

The line: A very flexible, powerful, and yet tractable framework for the analysis and determination of optimal monetary policy under  model uncertainty and certainty non-equivalence is introduced and shown to incorporate a large variety of different configurations of uncertainty and central-bank judgment.

“The Instrument-Rate Projection under Inflation Targeting: The Norwegian Example,” in Stability and Economic Growth: The Role of Central Banks, Banco de Mexico, 2006, 175-198, PDFAbstract.

The line: By publishing optimal projections of the instrument rate, inflation, and the output gap with uncertainty intervals, together with discussion, alternative scenarios, criteria for optimal projections (targeting rules), and cross-checking with alternative policy rules, Norges Bank (the central bank of Norway) has provided a model in transparent flexible inflation targeting for other central banks.

“Credible Commitment to Optimal Escape from a Liquidity Trap: The Role of the Balance Sheet of an Independent Central Bank” (with Olivier Jeanne, IMF), American Economic Review 97 (2007) 474-490, PDFAbstract.

The line: A central bank’s realistic concern about its capital provides a commitment mechanism that can solve the time-consistency problem associated with the optimal escape from a liquidity trap.

“Social Value of Public Information: Morris and Shin (2002) Is Actually Pro Transparency, Not Con,”  American Economic Review 96 (2006) 448-452. PDFAbstract.

The line: Morris and Shin’s result in their 2002 AER paper has widely been interpreted as an anti-transparency result, but it is actually a pro-transparency result.

“Monetary Policy and Japan’s Liquidity Trap,” January 2006, prepared for the ESRI International Conference on Policy Options for Sustainable Economic Growth in Japan, Cabinet Office, Tokyo, September 14, 2005, PDFAbstract.

The line: Monetary policy in Japan has focused on reducing expectations of future interest rates, but a more effective policy in a liquidity trap is to increase expectations of the future price level. The Foolproof Way is likely to be the most effective policy to do this.

“Optimal Inflation Targeting: Further Developments of Inflation Targeting,”  in Mishkin, Frederic, and Klaus Schmidt-Hebbel (eds.) (2007), Monetary Policy under Inflation Targeting, Banco Central de Chile, 187-225, PDFAbstract.

The line: Substantial progress can be made by inflation-targeting central banks by (1) employing an explicit intertemporal loss function, (2) making explicit decisions on optimal projection paths of the instrument rate, (3) publishing such projections, and (4) incorporating judgment and model uncertainty in a systematic way.

“The Role of Science in Best-Practice Monetary Policy: In Honor of Otmar Issing,” presented at “Monetary Policy: A Journey from Theory to Practice,” an ECB Colloqium held in honor of Otmar Issing in Frankfurt, March 16-17, 2006, PDFAbstract.

The line: There is a considerable amount of science in current best-practice monetary policy, but a considerable amount of judgment is also needed., which judgment preferably should be used in a systematic and disciplined way.

“Optimal Policy Projections” (with Robert J. Tetlow, Federal Reserve Board), International Journal of Central Banking 1(3) (2005) 177-207, PDFAbstract.

The line: Optimal Policy Projections – a method to give advice to policymakers on optimal monetary policy, taking central-bank judgment into account – is demonstrated with the Fed’s FRB/US model and two Greenbook forecasts.

“Time Consistency of Fiscal and Monetary Policy: A Solution” (with Mats Persson and Torsten Persson, Institute for International Economic Studies), Econometrica 74 (2006) 193-212, PDFAbstract.

The line: Time consistency of optimal fiscal and monetary policy is possible after all, counter to the impression left by Lucas and Stokey (1983), Calvo and Obstfeld (1990), and Alvarez, Kehoe, and Neumeyer (2004).

“Monetary Policy with Judgment: Forecast Targeting,” International Journal of Central Banking 1(1) (2005) 1-54, PDFAbstractAppendix.

The line: Monetary policy that uses central-bank judgment – information, knowledge, and views outside the scope of a particular model – may perform much better than monetary policy that disregards judgment and follows a simple instrument rule.

Related speech: Ben Bernanke, “The Logic of Monetary Policy,” Federal Reserve Board, December 2004, discusses forecast targeting (called “forecast-based policies”) and simple instrument rules (called “simple feedback policies”) with reference to “Monetary Policy with Judgment: Forecast Targeting.”

“The Magic of the Exchange Rate: Optimal Escape from a Liquidity Trap in Small and Large Open Economies,” Version 1.2, July 2004, PDFAbstract.

“Optimal Policy with Low-Probability Extreme Events,” in Macroeconomics, Monetary Policy, and Financial Stability – A Festschrift for Charles Freedman, Proceedings of a conference held by the Bank of Canada, Ottawa, June 2003, 79-104. PDFAbstract.

“Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others,” Journal of Economic Perspectives 17(4) (Fall 2003) 145-166, PDFAbstract.

“Implementing Optimal Policy through Inflation-Forecast Targeting,” (with Michael Woodford, Columbia University), in Bernanke, Ben S., and Michael Woodford, eds. (2005), The Inflation-Targeting Debate, University of Chicago Press, 19-83. PDFAbstract.

“Liquidity Traps, Policy Rules for Inflation Targeting, and Eurosystem Monetary-Policy Strategy,” research summary,  NBER Reporter, Winter 2002/2003PDFPrevious research summary for NBER Reporter, Winter 97/98.

“What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules,” Version 3.1, January 2003, Journal of Economic Literature 41 (2003) 426-477, PDFAbstract.

“Targeting Rules vs. Instrument Rules for Monetary Policy: What Is Wrong with McCallum and Nelson?” Federal Reserve Bank of St. Louis Review 87 (2005) 613-626, PDFAbstract.

The line: A response to McCallum and Nelson’s (2005) paper “Targeting Rules vs. Instrument Rules for Monetary Policy,” which criticizes my JEL 2003 article “What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules.”

A speech by Ben Bernanke, “The Logic of Monetary Policy,” Federal Reserve Board, December 2004, discusses these issue (forecast targeting/targeting rules are called “forecast-based policies” and simple instrument rules are called “simple feedback policies”).

An Independent Review of Monetary Policy and Institutions in Norway,” by Lars E.O. Svensson (chair) (Princeton University), Kjetil Houg (Alfred Berg), Haakon Solheim (Norwegian School of Management BI) and Erling Steigum (Norwegian School of Management BI), Norges Bank Watch 2002, Centre for Monetary Economics, Norwegian School of Management BI, September 2002.

“Monetary Policy and Real Stabilization,” September 2002, in Rethinking Stabilization Policy, A Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 29-31, 2002, 261-312, PDFAbstract.

“Optimal Policy with Partial Information in a Forward-Looking Model: Certainty-Equivalence Redux,” (with Michael Woodford, Columbia University), June 2002, PDFAbstract.

“Indicator Variables for Optimal Policy under Asymmetric Information,” (with Michael Woodford, Columbia University), June 2002, Journal of Economic Dynamics and Control 28 (2004) 661-690, PDFAbstract.

“Money and Inflation in the Euro Area: A Case for Monetary Indicators?” (with Stefan GerlachHong Kong Monetary Authority), Journal of Monetary Economics 50 (2003) 1649-1672, PDFAbstractData (Excel file).

“The Inflation Forecast and the Loss Function,” in Paul Mizen, ed. (2003), Central Banking, Monetary Theory and Practice: Essays in Honour of Charles Goodhart, Volume I, Edward Elgar, 135-152. PDFAbstract.

“Inflation Targeting: Should It Be Modeled as an Instrument Rule or a Targeting Rule?” European Economic Review 46 (2002) 771-780, PDFAbstract.

“The Foolproof Way of Escaping from a Liquidity Trap: Is It Really, and Can It Help Japan?” The Frank D. Graham Memorial Lecture, Princeton University, April 5, 2001. Non-technical summary | Overhead slides (PDF)

“Requiem for Forecast-Based Instrument Rules,” April 2001, PDFAbstract.

“Independent Review of the Operation of Monetary Policy in New Zealand: Report to the Minister of Finance,” February 2001

“Robust Control Made Simple: Lecture Notes,” February 2007, PDF.

“Indicator Variables for Optimal Policy,” (with Michael Woodford, Columbia University), Journal of Monetary Economics 50 (2003) 691-720. PDFAbstract.

  • Longer working paper version with more details, Jan 2002, PDF.

“The Zero Bound in an Open Economy: A Foolproof Way of Escaping from a Liquidity Trap,” Monetary and Economic Studies 19(S-1), February 2001, 277-312, PDFAbstract.

“The Equilibrium Degree of Transparency and Control in Monetary Policy,” (with Jon Faust, Federal Reserve Board), Journal of Money, Credit and Banking 34 (2002) 520-539, PDFAbstract.

“Eurosystem Monetary Targeting: Lessons from U.S. Data,” (with Glenn Rudebusch, Federal Reserve Bank of San Francisco), European Economic Review 46 (2002) 417-442, PDFAbstract.

“The First Year of the Eurosystem: Inflation Targeting or Not?” American Economic Review: Papers and Proceedings 90, May 2000, 95-99, PDFAbstract.

“Transparency and Credibility: Monetary Policy with Unobservable Goals” (with Jon Faust, Federal Reserve Board), International Economic Review 42 (2001) 369-397, PDFAbstract.

“How Should Monetary Policy Be Conducted in an Era of Price Stability?” in New Challenges for Monetary Policy, a symposium sponsored by the Federal Reserve Bank of Kansas City, held at Jackson Hole, Wyoming, August 26-28, 1999 (IIES Seminar Paper No. 680, CEPR Discussion Paper No. 2342, NBER Working Paper No. 7516), PDF (0.4 MB). Abstract.

“Price Stability as a Target for Monetary Policy: Defining and Maintaining Price Stability,” in Deutsche Bundesbank, ed. (2001), The Monetary Transmission Process: Recent Developments and Lessons for Europe, Palgrave, New York, 60-102. (CEPR Discussion Paper No. 2196, NBER Working Paper No. 7276), PDFAbstract.

“Does the P* Model Provide Any Rationale for Monetary Targeting?” German Economic Review 1 (February 2000) 69-81. (IIES Seminar Paper No. 671, June 1999, CEPR Discussion Paper No. 2198, NBER Working Paper No. 7178), PDFAbstract.

  • “Response to Seitz and Tödter, ‘How the P* Model Rationalises Monetary Targeting – A Comment on Svensson’,” German Economic Review 2 (2001) 309-312, PDFAbstract.
  • Franz Seitz and Karl-Heinz Tödter, “How the P* Model Rationalises Monetary Targeting – A Comment on Svensson,” German Economic Review 2 (2001) 303-308, PDF.

“Monetary Policy Issues for the Eurosystem,” Carnegie-Rochester Conferences Series on Public Policy 51(1) (1999) 79-136.

  • Conference version, February 1999, presented at the Carnegie-Rochester Conference on Issues Regarding European Monetary Unification, November 20-21, 1998, PDFAbstract.
  • Revised version for publication, IIES Seminar Paper No. 667, May 1999 (CEPR Discussion Paper No. 2197, NBER Working Paper No. 7177), PDFAbstract

“Inflation Targeting as a Monetary Policy Rule,” Journal of Monetary Economics 43 (1999) 607-654.

  • Working Paper version, presented at the Sveriges Riksbank-IIES Conference on Monetary Policy Rules, Stockholm, June 12-13, 1998. IIES Seminar Paper No. 646, August 1998 (CEPR Discussion Paper No. 1998, NBER Working Paper No. 6790), PDF.Abstract.
  • Revised and shortened Journal version, December 1998, PDFAbstract
  • Corrections.

“Inflation Targeting: Some Extensions,” Scandinavian Journal of Economics 101(3) (1999) 337-361.

  • Revised and corrected Working Paper version, February 1998, PDFAbstract.
  • Revised and shortened Journal version, December 1998, PDFAbstract.

“Price Level Targeting vs. Inflation Targeting: A Free Lunch?” Journal of Money, Credit and Banking 31 (1999) 277-295.

  • Most recent Working Paper version, August 1997, PDFAbstract.
  • Revised and shortened Journal version, August 1998, PDFAbstract.

“Policy Rules for Inflation Targeting” (with Glenn Rudebusch, Federal Reserve Bank of San Francisco), in John B. Taylor (ed.), Monetary Policy Rules, University of Chicago Press, 1999. IIES Seminar Paper No. 637, March 1998, (NBER Working Paper No. 6512),PDFAbstract.

“Open-Economy Inflation Targeting,” Journal of International Economics 50 (2000) 155-183.

“Inflationsmål i en öppen ekonomi: Strikt eller flexibelt inflationsmål?” (“Inflation Targeting in an Open Economy: Strict or Flexible Inflation Targeting?”), Ekonomisk Debatt 26(6) (1998) 431-439, PDF.

“Monetary Policy and Inflation Targeting,” research summary, NBER Reporter, Winter 1997/8, 5-8, PDF.  Recent research summary for NBER Reporter, Winter 2002/2003.

“Inflation Targeting in an Open Economy: Strict or Flexible Inflation Targeting?” Public Lecture held at Victoria University of Wellington, New Zealand, November 18, 1997. Victoria Economic Commentaries 15-1 (March 1998), PDF. Also available as RBNZ Discussion paper G97-8.

“Växelkursmål eller inflationsmål för Norge?” (“Exchange Rate Target or Inflation Target for Norway?”, in Swedish), Ekonomisk Debatt 25(8) (1997) 461-472, PDF.

“Exchange Rate Target or Inflation Target for Norway?” in Anne Berit Christiansen and Jan Fredrik Qvigstad, eds., Choosing a Monetary Policy TargetScandinavian University Press (Universitetsforlaget AS), Oslo, 120-138, 1997, PDF.

“New Techniques to Extract Market Expectations from Financial Instruments” (with Paul Söderlind, Stockholm School of Economics), Journal of Monetary Economics 40(2) (1997) 373-429, PDFAbstract and sample Gauss programs. Download printed article fromJournal of Monetary EconomicsCorrections.

“Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets,” European Economic Review 41 (1997) 1111-1146, PDF (320 KB). Abstract.

“Debt, Cash Flow and Inflation Incentives: A Swedish Example” (with Mats Persson and Torsten Persson) in G. Calvo and M. King, eds., The Debt Burden and its Consequences for Monetary Policy, London, Macmillan, 1998, 28-62, PDF (0.3 MB). Abstract.

“Optimal Inflation Targets, ‘Conservative’ Central banks, and Linear Inflation Contracts,” American Economic Review 87 (1997) 98-114. Abstract.

“Estimating Forward Interest Rates with the Extended Nelson & Siegel Method,” Quarterly ReviewSveriges Riksbank, 1995:3, 13-26, PDFAbstractSample Gauss programs.

“Macroeconomic and Political Determinants of Realignment Expectations: Some European Evidence” (with Andrew K. Rose, University of California at Berkeley), in Barry Eichengreen, Jerry Frieden and Jürgen von Hagen, eds., Monetary and Fiscal Policy in an Integrated Europe, Springer, Berlin, 1995.

“Estimating the Term Structure of Interest Rates for Monetary Policy Analysis,” (with Magnus Dahlquist, Stockholm School of Economics), Scandinavian Journal of Economics 98 (1996) 163-183.

“The Swedish Experience of an Inflation Target,” in Leonardo Leiderman and Lars E. O. Svensson, eds., Inflation TargetsCEPR, London, 1995.

“Inflation Targets: Introduction” (with Leonardo Leiderman, Tel-Aviv University), in Leonardo Leiderman and Lars E.O. Svensson, eds., Inflation TargetsCEPR, London, 1995.

“Kan man inflatera bort budgetunderskottet?” (“Can One Inflate Away the Budget Deficit?” in Swedish, with Mats Persson and Torsten Persson) in Ekonomisk politik: En vänbok till Assar LindbeckSNS, Stockholm, 1995.

Inflation Targets (edited with Leonardo Leiderman, Tel Aviv University), CEPR, London, 1995.

“Term, Inflation, and Foreign Exchange Risk Premia: A Unified Treatment,” NBER Working Paper No. 4544, November 1993, (IIES Seminar Paper No. 548), PDFAbstract.

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