Monetary Policy, Financial Stability, and Life at the IMF

• Pages: 1-3

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Volume 17, Number 2 June 2016

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B U L L E T I N

1

Monetary Policy, Financial Stability,

andLifeat the IMF

Lars E.O. Svensson, a professor in the D epartment of Economics

at the Stockholm School of Economics , recently finished his latest

stint as a Visiting Scholar at the Inter national Monetary Fund

(IMF). He discusses his ex periences at the IMF in Washington,

DC and his views on monetar y and macroprudential policy with

Eugenio Cerutti.

Eugenio Cerutti: You have visited the IMF on numerous occasions since the

late 1980s. Has the IMF changed in all these years? In which areasdo you

perceive more changes? Which aspects have notchanged as much?

Lars Svensson: at is a very good quest ion. In the late 1980s and early 1990s,

there were many academic visitors who, li ke me, were coming here, but we

mostly were doing our own research, a nd had less contact with IMF sta. In

this visit that la sted 15 months, I’ve had much more contact and worked more

with IMF sta , which I have appreciated very much. On my previous visits, I

did not have this opportun ity to work closely with sta and I don’t really have

the detailed k nowledge of the IMF’s work from previous years that I have from

this year; so I ca n’t really make a n in-depth comparison about how things have

changed around here. But I have noticed that the Fu nd has changed in two

particular areas:

The attitudes toward inf lation targeting have changed. In the 1990s , there

was a lot of skepticism about ination ta rgeting at the IMF. Fixed exchange rate

regimes were the norm. I thi nk it’s very dierent now. In the past, there was

a view at the Fund that for emerging m arkets to do ination targeting wit h a

oating exchange rate, the y needed to satisfy a long list of preconditions. And if

they didn’t satisfy a ll those preconditions, they shouldn’t do ination target ing.

Ithink Bra zil’s quick move to ination targeting in 1999 wit hout satisfying those

preconditions showed that all of the preconditions were not needed. Now, there

is a much more favorable view of ination targeti ng, and ination targeting has

spread to a large and increasing number of cou ntries. ere still seems to be some

reluctance when it comes to applying in ation targeting in low-income countries

or countries with less de veloped nancial markets. But, overall , there is a big

change in the attit ude toward ination targeting at the Fund. A nd, of course we

also now have Doug Laxton a nd his modeling division traveling the world teach-

ing countries and centr al banks how to do ination targeti ng in practice.

In This Issue

1 Monetary Policy,

FinancialStability, and

Lifeat the IMF

4 IMF Working Papers

7 IMF Economic Review

8 Recommended Readings

from IMF Publications

9 Staff Discussion Notes

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Interview with Lars E.O. Svensson