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Svensson, Lars E. O.

Works: 220 works in 1,605 publications in 2 languages and 7,259 library holdings
Roles: Editor, Other, Honoree
Classifications: HB1, 332.41
Publication Timeline
Publications about Lars E. O Svensson
Publications by Lars E. O Svensson
Most widely held works by Lars E. O Svensson
Inflation targeting as a monetary policy rule by Lars E. O Svensson( Book )
59 editions published between 1996 and 2010 in English and held by 351 libraries worldwide
Inflation targeting is a monetary-policy strategy that is characterized by an announced numerical inflation target, an implementation of monetary policy that gives a major role to an inflation forecast and has been called forecast targeting, and a high degree of transparency and accountability. It was introduced in New Zealand in 1990, has been very successful in terms of stabilizing both inflation and the real economy, and has, as of 2010, been adopted by about 25 industrialized and emerging-market economies. The chapter discusses the history, macroeconomic effects, theory, practice, and future of inflation targeting
Inflation targets by Workshop on Inflation Targets( Book )
7 editions published in 1995 in English and held by 267 libraries worldwide
Indicator variables for optimal policy by Lars E. O Svensson( Book )
32 editions published between 2000 and 2001 in English and held by 164 libraries worldwide
Abstract: The optimal weights on indicators in models with partial information about the state of the economy and forward-looking variables are derived and interpreted, both for equilibria under discretion and under commitment. An example of optimal monetary policy with a partially observable potential output and a forward-looking indicator is examined. The optimal response to the optimal estimate of potential output displays certainty-equivalence, whereas the optimal response to the imperfect observation of output depends on the noise in this observation
Inflation forecast targeting : implementing and monitoring inflation targets by Lars E. O Svensson( Book )
24 editions published between 1996 and 1997 in English and held by 143 libraries worldwide
Inflation targeting is shown to imply inflation forecast targeting: the central bank's inflation forecast becomes an explicit intermediate target. Inflation forecast targeting simplifies both implementation and monitoring of monetary policy. The weight on output stabilization determines how quickly the inflation forecast is adjusted towards the inflation target. Money growth or exchange rate targeting is generally inferior to inflation targeting and leads to higher inflation variability. Commitment to commitment to
Transparency and credibility : monetary policy with unobservable goals by Jon Faust( Book )
27 editions published in 1998 in English and held by 141 libraries worldwide
Abstract: We define and study transparency, credibility, and reputation in a model where the central bank's characteristics are unobservable to the private sector and are inferred from the policy outcome. A low-credibility bank optimally conducts a more inflationary policy than a high-credibility bank, in the sense that it induces higher inflation, but a less expansionary policy in the sense that it induces lower inflation and employment than expected. Increased transparency makes the bank's reputation and credibility more sensitive to its actions. This has a moderating influence on the bank's policy. Full transparency of the central bank's intentions is generally socially beneficial, but frequently not in the interest of the bank. Somewhat paradoxically, direct observability of idiosyncratic central bank goals removes the moderating incentive on the bank and leads to the worst equilibrium
The zero bound in an open economy : a foolproof way of escaping from a liquidity trap by Lars E. O Svensson( Book )
24 editions published in 2000 in English and held by 136 libraries worldwide
Abstract: The paper examines the transmission mechanism of monetary policy in an open economy with and without a binding zero bound on nominal interest rates. In particular, a foolproof way of escaping from a liquidity trap is presented, consisting of a price-level target path, a devaluation of the currency and a temporary exchange rate peg, which is later abandoned in favor of price-level or inflation targeting when the price-level target has been reached. This will jump-start the economy and escape deflation by a real depreciation of the domestic currency, a lower long real interest rate, and increased inflation expectations. The abandonment of the exchange-rate peg and the shift to price-level or inflation targeting will avoid the risk of overheating. Some conclusions for Japan are included
Policy rules for inflation targeting by Glenn D Rudebusch( Book )
27 editions published between 1997 and 1999 in English and held by 136 libraries worldwide
Abstract: Policy rules that are consistent with inflation targeting are examined in a small macroeconomic model of the US economy. We compare the properties and outcomes of explicit instrument rules' as well as targeting rules.' The latter, which imply implicit instrument rules, may be closer to actual operating procedures of inflation-targeting central banks. We find that inflation forecasts are central for good policy rules under inflation targeting. Some simple instrument and targeting rules do remarkably well relative to the optimal rule; others, including some that are often used as representing inflation targeting, do less well
Debt, cash flow and inflation incentives : a Swedish example by Mats Persson( Book )
22 editions published between 1996 and 1998 in English and held by 131 libraries worldwide
Abstract: The fiscal gains from, and hence the political incentives to, an increase in inflation rate of ten percentage points may be substantial: with Swedish data from 1994, these gains would have been an annual real flow of 3-4 percent of GDP, or a capitalized value of nearly 100 percent of GDP. They would mainly have arisen from the nominalistic features of the tax and transfer systems rather than from the traditional sources: seignorage and real depreciation of the public debt. The welfare costs of such an inflation increase would have been even larger, however, and would thus have reduced net welfare. Possible institutional reforms, aimed at making the political costs of inflation more equal to the social costs, are presented and discussed
Open-economy inflation targeting by Lars E. O Svensson( Book )
22 editions published between 1998 and 2000 in English and held by 131 libraries worldwide
The paper extends previous analysis of closed-economy inflation targeting to a small open economy with forward-looking aggregate supply and demand with some microfoundations, and with stylized realistic lags in the different transmission channels for monetary policy. The paper compares targeting of CPI and domestic inflation, strict and flexible inflation targeting, and inflation-targeting reaction functions and the Taylor rule. The optimal monetary policy response to several different shocks is examined. Flexible CPI-inflation targeting stands out as successful in limiting not only the variability of CPI inflation but also the variability of the output gap and the real exchange rate. Somewhat counter to conventional wisdom, negative productivity supply shocks and positive demand shocks have similar effects on inflation and the output gap, and induce similar monetary policy responses. The model gives limited support for a so-called monetary conditions index, MCI, of the monetary policy impact on aggregate demand, but the impact on inflation is too complex to be captured by any single index. The index differs from currently used indices in combing (1) a long rather than a short real interest rate with the real exchange rate and (2) expected future values rather than current values. Because of (2), the index is not directly observable and verifiable to external observers
Money and inflation in the euro area : a case for monetary indicators? by Stefan Gerlach( Book )
27 editions published between 2000 and 2002 in English and held by 128 libraries worldwide
Abstract: This paper studies the relationship between inflation, output, money and interest rates in the euro area, using data spanning 1980 2000. The P@* model is shown to have considerable empirical support. Thus, the price gap' or, equivalently, the real money gap' (the gap between current real balances and long-run equilibrium real balances), has substantial predictive power for future inflation. The real money gap contains more information about future inflation than the output gap and the Eurosystem's money-growth indicator (the gap between current M3 growth and a reference value). The results suggest that the Eurosystem's money-growth indicator is an inferior indicator of future inflation
Price stability as a target for monetary policy : defining and maintaining price stability by Lars E. O Svensson( Book )
27 editions published between 1998 and 1999 in English and held by 127 libraries worldwide
Abstract: This paper discusses how price stability can be defined and how price stability can be maintained in practice. Some lessons for the Eurosystem are also considered. With regard to defining price stability, the choice between price-level stability and low (including zero) inflation and the decisions about the price index, the quantitative target and the role of output stabilization are examined. With regard to maintaining price stability, three main alternatives are considered, namely a commitment to a simple instrument rule (like a Taylor rule), forecast targeting (like inflation-forecast targeting) and intermediate targeting (like money-growth targeting). A simple instrument rule does not provide a substitute for a systematic framework for monetary policy decisions. Such a framework is instead provided by forecast targeting. Forecast targeting can incorporate judgmental adjustments, extra-model information, and different indicators (including indicators of risks to price stability'). By extending mean forecast targeting to distribution forecast targeting, nonlinearity, nonadditive uncertainty and model uncertainty can be incorporated. Eurosystem arguments in favor of its money-growth indicator and against inflation-forecast targeting are scrutinized and found unconvincing
Optimal inflation targets, "conservative" central banks, and linear inflation contracts by Lars E. O Svensson( Book )
25 editions published between 1995 and 1997 in English and held by 124 libraries worldwide
Inflation target regimes (like those of New Zealand, Canada, U.K., Sweden and Finland) are interpreted as having explicit inflation targets and implicit output/unemployment targets. Without output-unemployment persistence delegation of monetary policy to a discretionary instrument-independent central bank with an optimal inflation target can eliminate the discretionary inflation bias, mimic the optimal linear inflation contract suggested by Walsh and extended by Persson and Tabellini, and achieve the equilibrium corresponding to an optimal rule with commitment. Thus an ìnflation target- conservative' central bank with an inflation target equal to the socially best inflation rate less any inflation bias dominates a Rogoff weight-conservative central bank with increased weight on inflation stabilizatiojn, which suboptimally increases output/unemployment variability. With output/ unemployment persistence, a constant inflation target is equivalent to a constant linear inflation contract. They can both eliminate the average inflation bias but not the state-contingent part of the inflation bias. Inflation variability is too high, and output variability too low, compared to the equilibrium corresponding to an optimal rule. An optimal state- contingent inflation target can remove all inflation bias, but in contrast to an optimal state-contingent linear inflation contract it still leaves inflation variability too high. Delegation with an optimal state-contingent inflation target to a Rogoff eight-conservative' central bank can then achieve the equilibrium corresponding to an optimal rule. Inflation targets may on average be exceeded, and they may have imperfect credibility, but they may usefully reduce inflation, and they appear much easier to implement
Price level targeting vs. inflation targeting : a free lunch? by Lars E. O Svensson( Book )
24 editions published between 1995 and 1996 in English and held by 124 libraries worldwide
Abstract: Price level targeting (without base drift) and inflation targeting (with base drift) are compared under commitment and discretion, with persistence in unemployment. Price level targeting is often said to imply more short-run inflation variability and thereby more employment variability than inflation targeting. Counter to this conventional wisdom, under discretion a price level target results in lower inflation variability than an inflation target (if unemployment is at least moderately persistent). A price level target also eliminates the inflation bias under discretion and, as is well known, reduces long-term price variability. Society may be better off assigning a price level target to the central bank even if its preferences correspond to inflation targeting. A price level target thus appears to have more advantages than commonly acknowledged
Estimating and interpreting forward interest rates : Sweden, 1992-1994 by Lars E. O Svensson( Book )
21 editions published in 1994 in English and held by 119 libraries worldwide
Abstract: The use of forward interest rates as a monetary policy indicator is demonstrated, using Sweden 1992-1994 as an example. The forward rates are interpreted as indicating market expectations of the time- path of future interest rates, future inflation rates, and future currency depreciation rates. They separate market expectations for the short, medium and long term more easily than the standard yield curve. Forward rates are estimated with an extended and more flexible version of Nelson and Siegel's functional form
New techniques to extract market expectations from financial instruments by Paul Söderlind( Book )
24 editions published between 1996 and 1997 in English and held by 118 libraries worldwide
Abstract: This paper is a selective survey of new or recent methods to extract information about market expectations from asset prices for monetary policy purposes. Traditionally, interest rates and forward exchange rates have been used to extract expected means of future interest rates, exchange rates and inflation. More recently, these methods have been refined to rely on implied forward interest rates, so as to extract expected future time-paths. Very recently only the means but the whole (risk neutral) probability distribution from a set of option prices
Monetary policy issues for the Eurosystem by Lars E. O Svensson( Book )
23 editions published between 1994 and 1999 in English and held by 118 libraries worldwide
Abstract: The paper discusses the choice between inflation targeting and monetary targeting as a strategy for the Eurosystem, the actual strategy the Eurosystem announced in the fall of 1998, the framework for policy decisions appropriate for achieving the goals of the Eurosystem, the role of exchange rate management in the EMU, and the accountability and transparency of the Eurosystem. The choice between inflation targeting and monetary targeting is, in effect, a choice between high and low transparency. Inflation targeting and monetary targeting, in practice, imply similar policy decisions, but monetary targeting implies that policy decisions are explained in terms of money-growth developments that are not essential for policy. The Eurosystem has specified an operational inflation target, although in a somewhat ambiguous way. More importantly, its announced monetary strategy is deficient, since it proposes a prominent role for an essentially irrelevant money-growth indicator in analysis and communication, but will keep secret the inflation forecast that will, in practice, be the decisive input in policy decisions. Exchange rate policy is controlled by the Council of finance ministers in the EMU; this is a major inconsistency in the Maastricht Treaty and a possible threat to the independence of the Eurosystem. The European Parliament may have a crucial role in ensuring the accountability of the Eurosystem; the minimum transparency needed for effective outside monitoring and evaluation of the Eurosystem's policy decisions seem to require published inflation forecasts and, most likely, published minutes and voting records of the Governing Council
The Swedish experience of an inflation target by Lars E. O Svensson( Book )
22 editions published between 1994 and 1995 in English and held by 117 libraries worldwide
Abstract: The paper gives a brief account of the Swedish experience of an inflation target in a floating exchange rate regime; identifies, documents and discusses the current problems in Swedish monetary policy and their origins; considers what can be done to remedy the problems; and draws some general conclusions. The two main current problems are the lack of credibility of the target and the significant risk that the target will be missed. The reasons for the lack of credibility include the fiscal situation, the institutional setup of monetary policy, the political division about monetary policy, and the insufficient transparency of and commitment to the current inflation- targeting policy
Does the P* model provide any rationale for monetary targeting? by Lars E. O Svensson( Book )
22 editions published between 1999 and 2000 in English and held by 115 libraries worldwide
The so-called P model is frequently used or referred to in discussions of monetary targeting. This gives the impression that the P model might provide some rationale for monetary targeting or for the monetary reference value used by the Eurosystem. The P model implies that inflation is determined by the level of and changes in the 'money gap' (the deviation of current real balances from their long-run equilibrium level), and hence that the real money gap is an important indicator for future inflation. Nevertheless, the P model does not seem to provide any rationale for either a Bundesbank-style money-growth target or a Eurosystem-style money-growth indicator
How should monetary policy be conducted in an era of price stability? by Lars E. O Svensson( Book )
22 editions published between 1999 and 2000 in English and held by 113 libraries worldwide
Abstract: The paper discusses several issues related to how monetary policy should be conducted in an era of price stability. Low inflation (with base drift in the price level) and price-level stability (without such base drift) are compared, and a suitable loss function (corresponding to flexible inflation targeting) is discussed, including the index and level for the inflation target. Three ways of maintaining price stability are examined, namely (1) a commitment to a simple instrument rule, (2) "forecast targeting," and (3) monetary targeting. Both (1) and (3) are found to be inferior to forecast targeting in maintaining price stability. The benefits of credibility (private inflation expectations coinciding with the inflation target) are discussed. Credibility improves the tradeoff between inflation variability, output-gap variability and instrument variability and makes it easier for the central bank to meet its inflation target. The threat of deflation and a liquidity trap is examined. Transparent inflation targeting and a contingency plan with emergency measures, including a coordinated fiscal and monetary expansion, are likely to avoid a liquidity trap, but also contribute to escaping from one if already trapped
European exchange rate credibility before the fall by Andrew Rose( Book )
24 editions published between 1992 and 1994 in English and Swedish and held by 109 libraries worldwide
Abstract: Realignment expectations which measure exchange rate credibility are analyzed for European exchange rates, using daily financial data since the inception of the EMS. It is difficult to find economically meaningful relationships between realignment expectations and macroeconomic variables, although there are signs that lower inflation improves credibility. Statistically, many movements to realignment expectations are common to ERM participants. There were few indications of poor ERM credibility before late August 1992; the dimensions of the currency crisis of September 1992 appear to have taken both policy-makers and private agents largely by surprise
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Alternative Names
Svensson, L. 1947-
Svensson, L. E.
Svensson, L. E. O. 1947-
Svensson, Lars 1947-
Svensson, Lars E.
Svensson, Lars E. 1947-
Svensson, Lars Erik Oscar 1947-
Svensson, Lars Erik Oskar 1947-
スベンソン, ラルス E O
English (504)
Swedish (1)
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