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Can variations in risk cause non-negligible fluctuations in the flow of investment? This issue has so far only been studied in models with a fixed level of risk. Comparative statics may be inadequate, since risk varies over time. In this paper, a simple irreversible investment model is extended by including a stochastic process for the risk level. An(More)
flation expectations. As a nominal anchor, an inflation target also provides a commitment mechanism that increases the accountability of the monetary policy authority. The inflation target communicates to the public the inflation rate at which the central bank will aim in the future. It thus serves as a reference point against which the central bank can be(More)
The use of explicit inflation targets has meant that monetary policy has become more transparent and also easier to evaluate. The analysis in this paper is based on forecasts by Sveriges Riksbank (the central bank of Sweden) on real output and inflation. Our purpose is to separate the effects on the interest-rate instrument from (i) discretionary changes in(More)
In the summer of 2010, the Federal Reserve and Riksbank forecasts for inflation and unemployment were quite similar. The forecasts for inflation were below the Federal Reserve’s mandate-consistent rate and the Riksbank’s inflation target, and the forecasts for unemployment were above a sustainable unemployment rate. This situation seems to call for more(More)
It was noted that Carl-Johan Belfrage and Andreas Johnson would prepare draft minutes of paragraphs 1, 2 and 3 on the agenda for the meeting. Lena Strömberg of the Financial Stability Department began by presenting recent developments regarding financial stability. The so-called three-month basis spread, which is a commonly-used measure of the market's(More)
It was noted that Johanna Jeansson and Andreas Johnson would prepare draft minutes of § 1, 2 and 3 on the agenda for the meeting. It was further noted that the traffic problems in Europe following the volcanic eruption in Iceland meant that Governor Stefan Ingves was unable to take part in the monetary policy meeting, and that in his absence First Deputy(More)
Monetary policy can achieve average inflation equal to a given inflation target and, at best, a good compromise between inflation variability and output-gap variability. The complex transmission mechanism, varying lags and strength of the effects through different channels, unpredictable shocks and inherent uncertainty prevent any fine-tuning. Monetary(More)
* The author wishes to thank in particular Claes Berg, Sten Hansen, Kerstin Hallsten, Marie Hesselman, Joanna Gerwin, Martin W Johansson, Jesper Lindé, Magnus Lindskog, Caroline Richards, Per Sonnerby, Annika Svensson and Jakob Winstrand for their valuable comments. The views expressed in this article are my own and are not to be regarded as representing(More)