This is an excellent account of how academics have shaped the various research/economist ideas shaped monetary policy at central banks. It is from Riksbank economists so the focus is on Sweden but is a good read. It is like this Mishkin chapter but has some more ideas on inflation targeting.
Apart from this, the paper tells us about how Riksbank uses academics to further its efforts. There are 3 ways:
- interaction – this is the informal way here central banks work on the acad ideas and acads do research on central banks policies
- formal collaboration – In this Riksbank funds outside economists for reports/papers and both work closely.
- internalisation- riksbank has developed its own staff of monetary economists and funds various research papers/projects
This pretty much applies to most central banks and is a neat categorisation of research work at central banks.
This got me interested in another issue. As I posted sometime ago, RBI evolved its own Multiple Indicator Approach. I was just wondering what academic thinking led to this unique framework. I haven’t come across any developed/developing world monetary economist advocating such approach. So it is pretty much an Indianised version which has worked quite well given the Indian setting. I haven’t come across any papers barring RBI speeches/RBI papers explaining the approach. Even these papers just explain the framework. What is more interesting (atleast for a history loving person like me) is which RBI economists/economic thought led to this framework? What were the main issues/constraints?
It will be great if RBI publishes some papers on Indian monetary history discussing these ideas. If such papers already exist and visitors know it, please let me know.