DP8789 Central-banking challenges for the Riksbank: Monetary policy, financial-stability policy and asset management
|Author(s):||Lars E.O. Svensson|
|Publication Date:||February 2012|
|Keyword(s):||central bank asset management, macroprudential policy, monetary policy|
|JEL(s):||E42, E52, E58, G18, G28|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=8789|
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 Riksbank?s balance sheet.