Lars E.O. SvenssonAffiliated Professor
About me
Professor Lars E.O. Svensson is an Affiliated Professor at the IIES, since June 2009 and Visiting Professor at the Stockholm School of Economics since May 2013. He was Deputy Governor of Sveriges Riksbank (the central bank of Sweden) during May 2007- May 2013, Professor of Economics at Princeton University during 2001-2009, and Professor of International Economics at the Institute for International Economic Studies, Stockholm University during 1984-2003. He has published extensively in scholarly journals on monetary economics and monetary policy, exchange-rate theory and policy, and general international macroeconomics. He has lectured and visited at universities, central banks, and international organizations in many countries. He received his Ph.D. in economics from Stockholm University.
He received the Great Gold Medal of the Royal Swedish Academy of Engineering Sciences in 2012. He is a foreign honorary member of the American Economic Association, a member of the Royal Swedish Academy of Sciences, a member of Academia Europaea, a foreign member of the Finnish Academy of Science and Letters, a foreign honorary member of the American Academy of Arts and Sciences, an honorary member of the Latin American and Caribbean Economic Association, a fellow of the Econometric Society, a fellow of the European Economic Association, a research associate of the National Bureau of Economic Research, and a research fellow of the Centre for Economic Policy Research, London. He was chair of the Prize Committee for the Alfred Nobel Memorial Prize in Economic Sciences during 1999-2001, member during 1993-2002, and secretary during 1988-1992.
He was active as advisor to Sveriges Riksbank during 1990-2007 and was a member of the Monetary Policy Advisory Board and the Economic Advisory Panel of the Federal Reserve Bank of New York from 2004 until his appointment as Deputy Governor of the Riksbank. He has regularly consulted for international, U.S., and Swedish agencies and organizations. In 2000-2001 he undertook a review of monetary policy in New Zealand, commissioned by the New Zealand government, and in 2002 he chaired a committee reviewing monetary policy in Norway.
A more extensive list of Svensson's publications can be found on his personal web.
Publications
A selection from Stockholm University publication database
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Open-Economy Inflation Targeting
1998. Lars E.O. Svensson.
ReportRead more about Open-Economy Inflation TargetingThe paper extends previous analysis of closed-economy inflation targeting to a small open economy with forward-looking aggregate supply and demand with some microfoundations, and with stylized realistic lags in different transmission channels for monetary policy. The paper compares targeting of CPI and domestic inflation, strict and flexible inflation targeting, and inflation-targeting reaction functions and the Taylor rule. The optimal monetary policy response to several different shocks is examined. Flexible CPI-inflation targeting stands out as successful in limiting not only the variability of CPI inflation but also the variability of the output gap and the real exchange rate. Somewhat counter to conventional wisdom, negative productivity supply shocks and positive demand shocks have similar effects on inflation and the output gap, and induce similar monetar policy responses. The model gives limited support for a so-called monetary conditions index, MCI, of the monetary-policy impact on aggregate demand, but the impact on inflation is too complex to be captured by any single index. The index differs from currently used indices in combing (1) a long rather than a short real interest rate with the real exchange rate and (2) expected future values rather than current values. Because of (2), the index is not directly observable and verifiable to external observers.
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Inflation Targeting as a Monetary Policy Rule
1998. Lars E.O. Svensson.
ReportRead more about Inflation Targeting as a Monetary Policy RuleThe purpose of the paper is to survey and discuss inflation targeting in the context of monetary policy rules. The paper provides a general conceptual discussion of monetary policy rules, attempts to clarify the essential characteristics of inflation targeting, compares inflation targeting to other monetary policy rules, and draws some conclusions for the monetary policy of the European System of Central Banks.
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Policy Rules for Inflation Targeting
1998. Glenn D. Rudebusch, Lars E.O. Svensson.
ReportRead more about Policy Rules for Inflation TargetingPolicy rules that are consistent with inflation targeting are examined in a small macroeconomic model of the US economy. We compare the properties and outcomes of explicit "instrument rules" as well as "targeting rules." The latter, which imply implicit instrument rules, may be closer to actual operating procedures of inflation-targeting central banks. We find that inflation forecasts are central for good policy rules under inflation targeting. Some simple instrument and target rules do remarkably well relative to the optimal rule; others, including some that are often used as representing inflation targeting, do less.
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Estimating and Interpreting Forward Interest Rates
1994. Lars E.O. Svensson.
ReportRead more about Estimating and Interpreting Forward Interest RatesThe use of forward interest rates as a monetary policy indicator is demonstrated, using Sweden 1992-1994 as an example. The forward rates are interpreted as indicating market expectations of the time-path of future interest rates, future inflation rates, and future currency depreciation rates. They separate market expectations for the short, medium and long term more easily than the standard yield curve. Forward rates are estimated with an extended and more flexible version of Nelson and Siegel's functional form.
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Inflation Forecast Targeting
1996. Lars E.O. Svensson.
ReportRead more about Inflation Forecast TargetingInflation targeting is shown to imply inflation forecast targeting: the central bank's inflation forecast becomes an intermediate target. Inflation forecast targeting simplifies both implementing and monitoring of monetary policy. The inflation forecast is actually an ideal intermediate target: it is most correlated with the goal, easier to control than the goal, more observable than the goal, and very transparent. Money growth targeting generally leads to higher inflation variability than inflation targeting. In the rare special cases when either money growth or the exchange rate is the best intermediate target, inflation forecast targeting automatically implies the relevant intermediate target.
Show all publications by Lars E.O. Svensson at Stockholm University