Monetary Economics, Spring 2014 (2nd year Ph.D. course, organized by Stockholm University, Uppsala University, and the Riksbank) (taught by Johan Söderberg, Stockholm University, Nils Gottfries, Uppsala University, and Lars E.O. Svensson, SIFR – The Institute for Financial Research, Stockholm School of Economics)

Two lectures on Practical Monetary Policy by Lars E.O. Svensson on Friday, May 16, and Wednesday, May 21, both at 14:15-17 at the Riksbank.

Preliminary reading list [preliminary]

The main readings for these lectures are Svensson (2013b, 2011c, 2013d,e, 2014a, b), Sveriges Riksbank (2013c, 2014), Bernanke (2013), Smets (2013), Woodford (2012), and Svensson (2012a). The topics covered will be the possibility of a non-vertical long-run Phillips curve, the theory and practice of inflation targeting, monetary policy in Sweden in the last few years, the ongoing debate on the relation between monetary policy and financial policy (policy for financial stability, macro-prudential policy), and the issue of whether monetary policy in Sweden should target household debt or not.

Students not familiar with the Riksbank minutes and other material from the monetary policy meetings may want to check out Sveriges Riksbank (2013b). Minutes from the policy meetings are available here.

Lecture notes will be available here, for downloading hopefully before each lecture

• Lecture notes 1 The possible unemployment cost of average inflation below a credible target
• Lecture notes 2 Inflation targeting
• Lecture notes 3 Some lessons from six years of practical inflation targeting
• Lecture notes 4 Household debt and monetary policy in Sweden

Readings (preliminary): (* denotes required reading)

Adolfson, Malin, Stefan Laséen, Jesper Lindé, and Lars E.O. Svensson (2011), “Optimal Monetary Policy in an Operational Medium-Sized DSGE Model,” Journal of Money, Credit and Banking  43, 1287-1331. PDF.

Akerlof, George A., William T. Dickens, and George L. Perry (2000), “Near-Rational Wage and Price Setting and the Long-Run Phillips Curve,” Brookings Papers on Economic Activity  1:2000, 1-44. PDF.

Assenmacher-Wesche, Katrin, and Stefan Gerlach (2010), “Monetary policy and financial imbalances: Facts and fiction”, Economic Policy, July 2010, 439-482.

*Bernanke, Ben S. (2013), “Monitoring the Financial System,” speech at the Federal Reserve Bank of Chicago, May 10, 2013. PDF.

Blanchard, Olivier, and Jordi Galí (2010), “Labor Markets and Monetary Policy: A New Keynesian Model with Unemployment,” American Economic Journal – Macroeconomics 2, 1-30.

Claussen, Carl Andreas, Jonsson, Magnus and Lagerwall, Björn (2011), “A macroeconomic analysis of housing prices in Sweden”, The Riksbank’s commission of inquiry into risks on the Swedish housing market , April 2011, pages. 67–95. English Swedish

Englund, P. (2011), “Swedish house prices in an international perspective”, The Riksbank’s inquiry into risks in the Swedish housing market. www.riksbank.se.

Finansinspektionen (the Swedish FSA) (2012), “The Swedish Mortgage Market,” March 2012, English Swedish.

Flodén, Martin (2011), “Comments on Ingves, ‘Flexible Inflation Targeting in Theory and Practice’,” (in Swedish) Ekonomisk Debatt 39(6) 80-86. Swedish.

Flodén, Martin (2012), “A Note on Swedish Inflation and Inflation Expectations,” working paper, English.

*Flodén, Martin (2014a), “Did Household Debt Matter in the Great Recession,” supplement to blog post.

Floden, Martin (2014b), “The Low Inflation – Should We Be Worried and Can We Do Anything About It?” speech in Stockholm, May 14, 2014.

Ingves, Stefan (2011), “Flexible Inflation Targeting in Theory and Practice,” speech in Stockholm, May 13, 2011. English Swedish

*International Monetary Fund (2013), “The Dog that Didn’t Bark,” chapter 3 of World Economic Outlook, April 2013, PDF.

Kocherlakota, Narayanaa (2013), “Operational Implications of the FOMC’s Principles Statement,” speech at the Federal Reserve Bank of Boston, April 13, 2013. Slides.

Laséen, Stefan, och Lars E.O. Svensson (2011), “Anticipated Alternative Instrument-Rate Paths in Policy Simulations,” International Journal of Central Banking 7(3) 1-35.  PDF.

Leeper, E. M., and T. Zha (2003), “Modest Policy Interventions,” Journal of Monetary Economics 50 (8): 1673–1700.

*Schularick, Moritz, och Alan M. Taylor (2012), ”Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870-2008”, American Economic Review 102, 1029–1061.

*Smets, Frank (2013), “Financial Stability and Monetary Policy: How Closely Interlinked?” Sveriges Riksbank Economic Review 2013:3, 121-160.

Sørensen, Peter Birch (2013), “The Swedish Housing Market: Trends and Risks,” Report to the Fiscal Policy Council 2012/5, PDF.

Svensson, Lars E.O. (2003), “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. PDF.

Svensson, Lars E.O. (2010a), “Some Problems with Swedish Monetary Policy and Possible Solutions,” speech in Stockholm, November 24, 2010. English Swedish

Svensson, Lars E.O. (2010b), “Inflation Targeting and Financial Stability,” Policy lecture at the CEPR/ESI 14th Annual Conference on “How Has Our View of Central Banking Changed with the Recent Financial Crisis?”, hosted by the Central Bank of Turkey, Izmir, October 28, 2010. English.

Svensson, Lars E.O. (2010c), “Why a Lower Repo Rate Path?”, speech at Umeå University, February 24, 2010. English. Swedish.

Svensson, Lars E.O. (2011a), “For a Better Monetary Policy: Focus on Inflation and Unemployment,” speech at Luleå University of Technology, March 8, 2011. English. Swedish.

Svensson, Lars E.O. (2011b), “Central-Banking Challenges for the Riksbank: Monetary Policy, Financial-Stability Policy, and Asset Management,” the Félix Neubergh Lecture 2011, University of Gothenburg, November 17, 2011. PDF.

*Svensson, Lars E.O. (2011c), “Inflation Targeting,” chapter 22 in Friedman, Benjamin M., and Michael Woodford, eds., Handbook of Monetary Economics, Volume 3b, Elsevier. PDF.

*Svensson, Lars E.O. (2011d), “Practical Monetary Policy: Examples from Sweden and the United States,” Brookings Papers on Economic Activity, Fall 2011, 289-332. PDF. Appendix.

*Svensson, Lars E.O. (2012a), “Comment on Michael Woodford, ‘Inflation Targeting and Financial Stability,” Sveriges Riksbank Economic Review 2012:1, 33-39. PDF.

Svensson, Lars E.O. (2012b), “Gaps,” notes. PDF.

Svensson, Lars E.O. (2012c), “Monetary Policy, Debt, and Unemployment,” speech at SNS, Stockholm, November 14, 2012. English Swedish

Svensson, Lars E.O. (2012d), “Unemployment Gaps: A Note on Blanchard and Gali (2010),” PDF.

Svensson, Lars E.O. (2012e), “Correcting the Riksbank’s Estimate of the Long-Run Sustainable Rate of Unemployment,” comment, Appendix 2 of Riksbank July 2012 Minutes. English Swedish

Svensson, Lars E.O. (2013a), “Monetary Policy and Employment: Monetary Policy Is Too Tight” , speech at The Swedish Trade Union Confederation, LO, Stockholm, January 16, 2013. English Swedish.

*Svensson, Lars E.O. (2013b), “The Possible Unemployment Cost of Average Inflation below a Credible Target,” American Economic Journal: Macroeconomics, forthcoming.

Svensson, Lars E.O. (2013c), “Reservation against the Riksbank Account of Monetary Policy 2012,” English  Swedish

*Svensson, Lars E.O. (2013d), “Some Lessons from Six Years of Practical Inflation Targeting,” Sveriges Riksbank Economic Review 2013:3, 29-80.

*Svensson, Lars E.O. (2013e), ”’Leaning against the wind’ increases (not reduces) the household debt-to-GDP ratio,” working paper.

*Svensson, Lars E.O. (2014a), “Deflation in Sweden: Questions and answers,” blog post, larseosvensson.se.

*Svensson, Lars E.O. (2014b), “Inflation Targeting and ‘Leaning Against the Wind’,” International Journal of Central Banking, forthcoming.

Sveriges Riksbank (2010), Monetary Policy in Sweden, English Swedish

Sveriges Riksbank (2011b) Monetary policy decisions: Meetings, Report/Update, Press Release, and Attributed Minutes. English Swedish.

Sveriges Riksbank (2012), “Minutes of April 2012 Meeting”, English Swedish

Sveriges Riksbank (2013a), “Account of Monetary Policy 2012,” English  Swedish

Sveriges Riksbank (2013b), “Minutes of the April 2013 Meeting,” English Swedish

*Sveriges Riksbank (2013c), “Financial imbalances in the monetary policy assessment,” box in Monetary Policy Report July 2013.

*Sveriges Riksbank (2014), “The effects of monetary policy on household debt,” box in Monetary Policy Report February 2014.

Woodford, Michael (2007), “The Case for Forecast Targeting as a Monetary Policy Strategy,” Journal of Economic Perspectives 21(4), 3-24.

*Woodford, Michael (2012), “Inflation Targeting and Financial Stability,” Sveriges Riksbank Economic Review 2012:1, 7-32. PDF.