Tommy Sveen

Journal of International Money and Finance 137 Doi: https://doi.org/10.1016/j.jimonfin.2023.102893

We study how monetary policy should respond to shocks that permanently alter the steady state structure of the economy. In such a case monetary policy affects not only the short run misallocations due to nominal rigidities, but also relative prices which stimulate reallocation of capital. We consider a permanent and negative shock to export revenues that requires a larger traded sector and a smaller non-traded sector in the new steady state. This reallocation calls for a change in relative prices during the transition, but may also lead to a period of high unemployment. We show how an appropriate monetary policy could mitigate the welfare costs of the transition by allowing the exchange rate to depreciate, and thereby allowing inflation to increase in the short run. Traditional monetary policy regimes, such as inflation targeting or a fixed exchange rate, would imply high unemployment and inefficiently slow transition. Stabilizing nominal wage growth, in contrast, would be close to the welfare-optimal monetary policy.

The B.E. Journal of Macroeconomics 23(2) p. 1037-1055 Doi: https://doi.org/10.1515/bejm-2022-0129

Standard (S, s) models of lumpy investment allow us to match many aspects of the micro data, but it is well known that the implied interest rate sen- sitivity of investment is unrealistically large. In fact, the micro-level lumpiness in investment puts empirical discipline on the modeling of investment decisions, and this makes it hard to explain the monetary policy transmission mechanism.

Samfunnsøkonomen 137(6) p. 41-52

Vi utvikler en teori for det optimale samspillet mellom penge- og finanspolitikken i konjunkturstyringen. Mens en i utgangspunktet kunne tro at penge- og finanspolitikken bør dra konjunkturene i samme retning, viser vi at dette ikke nødvendigvis er tilfelle. Dersom det ikke er store kostnader ved å bruke renten aktivt, skal penge- og finanspolitikken dra i hver sin retning ved inflasjonssjokk og valutakurssjokk. Grunnen er at pengepolitikken kan påvirke inflasjonen både gjennom etterspørselskanalen og gjennom valutakurskanalen, mens finanspolitikken bare kan benytte etterspørselskanalen. Pengepolitikken har derfor et komparativt fortrinn i å stabilisere inflasjonen, mens finanspolitikken har et komparativt fortrinn i å stabilisere produksjonen. Kun når det er tilstrekkelig store kostnader ved å endre renten, vil det være optimalt at penge- og finanspolitikken skal dra i samme retning ved inflasjonssjokk og valutakurssjokk. Kostnader ved bruk av finanspolitikk har ingen betydning for om penge- og finanspolitikk skal dra i samme retning eller ikke, men har implikasjoner for hvor sterk virkemiddelbruken bør være.

The B.E. Journal of Macroeconomics 20(1) p. 1-18 Doi: https://doi.org/10.1515/bejm-2018-0217

Canova et al. [Canova, F., J. D. López-Salido, and C. Michelacci. 2010. “The Effects of Technology Shocks on Hours and Output: A Robustness Analysis.” Journal of Applied Econometrics 25: 755–773; Canova, F., J. D. López-Salido, and C. Michelacci. 2012. “The Ins and Outs of Unemployment: An Analysis Conditional on Technology Shocks.” The Economic Journal 123: 515–539] estimate the dynamic response of labor market variables to technological shocks. They show that investment-specific shocks imply predominantly an adjustment along the intensive margin (i.e., hours per worker), whereas for neutral shocks the largest share of the adjustment takes place along the extensive margin (i.e., employment). In this paper we develop a New Keynesian model featuring capital accumulation, two margins of labor adjustment and a hiring cost. The model is used to analyze a novel economic mechanism to explain that evidence.

The B.E. Journal of Macroeconomics 20(1) p. 1-11 Doi: https://doi.org/10.1515/bejm-2018-0010

Centre for Monetary Economics

Handelshøyskolen BI

Each year the Centre for Monetary Economics (CME) at The Department of Economics, BI Norwegian Business School, appoints an independent group of experts to evaluate monetary policy in Norway. This year the committee consists of Jeanette Strøm Fjære, Macroeconomist at DnB Markets, and myself, Professor in Economics at BI Norwegian Business School. The committee is solely responsible for the report and the views therein. The report does not necessarily represent the views of the CME or of its members. The Ministry of Finance partly funds the Norges Bank Watch reports, which contain useful information and analyses for the Ministry’s evaluation of monetary policy presented each year in a White Paper to Parliament.

Handelshøyskolen BI

BI Norwegian Business School

Bank of Canada research seminar