Central-Banking Challenges for the Riksbank: Monetary Policy, Financial-Stability Policy and Asset Management
Lars E. O. Svensson
Stockholm School of Economics; Stockholm University - Institute for International Economic Studies (IIES); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)
CEPR Discussion Paper No. DP8789
The Riksbank faces challenges with regard to each of its three core functions, conducting monetary policy with the objective of stabilising inflation around the inflation target and resource utilisation around a sustainable level, promoting a safe and efficient payment system and thereby conducting a policy for financial stability, and managing its financial assets to attain a good risk-adjusted rate of return without prejudice to the first two core functions. I conclude that the challenges are best met by focusing monetary policy exclusively on stabilising inflation around the inflation target and resource utilisation around a sustainable level and not treating the policy rate, housing prices or household debt as separate explicit or implicit target variables, by not confusing monetary policy with financial-stability policy but treating them as separate policies, and by eliminating the large unnecessary currency risk in the Riksbanks balance sheet.
Number of Pages in PDF File: 16
Keywords: central bank asset management, macroprudential policy, monetary policy
JEL Classification: E42, E52, E58, G18, G28
Date posted: January 31, 2012
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