Norges Bank’s new monetary policy loss function – further discussion
- Author:
- Snorre Evjen, Norges Bank Monetary Policy, and Thea B. Kloster, Norges Bank Financial Stability.
- Series:
- Staff Memo
- Number:
- 11/2012
Abstract
Norges Bank’s Monetary Policy Report (MPR) 1/12 introduced amendments to the criteria for an appropriate interest rate path in order to explicitly take into account the risk of a buildup of financial imbalances. The monetary policy “loss function” used in model-based analyses was accordingly adjusted mainly in two ways: The weight on the output gap was increased and a weight on the deviation between the actual and the normal interest rates was added. We present both theoretical and empirical studies underpinning these changes.
Staff Memo inneholder utredninger og dokumentasjon skrevet av Norges Banks ansatte og andre forfattere tilknyttet Norges Bank. Synspunkter og konklusjoner i arbeidene er ikke nødvendigvis representative for Norges Bank.
ISSN 1504-2596 (online)