Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/209868 
Year of Publication: 
2006
Series/Report no.: 
Working Paper No. 2006/5
Publisher: 
Norges Bank, Oslo
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 appropriate 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. Examples used in explaining the criteria are drawn from Norwegian experiences.
Subjects: 
forecasts
flexible inflation targeting
optimal monetary policy
JEL: 
E42
E52
E58
Persistent Identifier of the first edition: 
ISBN: 
82-7553-355-4
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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