It was the IMF’s fault!

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This is what “guest writer” has to say at Alphaville:

In sum, rather than Sweden sealing the case against a dual mandate for monetary instruments for inflation and financial stability, it rather makes the case for need to take account in monetary policymaking of upward bias in global forecasts, for preparation of much better assessments of banking fragility, and for a rethink on forward guidance. And, of course, Sweden makes the case for the need to continue research into macro-prudential instrument effectiveness, and for the need to correct monetary policy errors—whatever their provenance—promptly.

It´s in the nature of the” widely held” IMF to have an upward bias in its forecasts, just as it is very hard for the CEO of a widely held group to go to the shareholders meeting to present dire forecasts.

Sweden hasn’t realized that an inflation target is not the best target, especially in moments where supply shocks prevail. To add a financial stability target to the “soup” cannot make it “tastier”!

Yes, they were doing better than average, until they screwed up!


About the Author

Marcus Nunes
João Marcus Marinho Nunes is a partner of Phynance Estratégias Quantitativas e Investimentos and a professor of Economics at Fundação Getúlio Vargas in São Paulo, Brazil. He also blogs here:

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