Central-banking challenges for the Riksbank: Monetary policy, financial-stability policy and asset management

Lars E.O. Svensson

No 8789, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: Central bank asset management; Macroprudential policy; Monetary policy (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 G18 G28 (search for similar items in EconPapers)
Date: 2012-02
New Economics Papers: this item is included in nep-ban, nep-mac and nep-mon
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Citations: View citations in EconPapers (7)

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