New Working Papers from Norges Bank.

Norges Bank's Working Papers (Arbeidsnotater) present research projects (not necessarily in their final version), and are published among other reasons to enable the author to benefit from the comments of colleagues and interested parties. Only Working Papers published in English are listed below. Subscriptions are available free of charge and individual copies may be obtained from the Information Department of Norges Bank. Postal address: PO Box 1179 Sentrum, N-0107 Oslo, Norway.

Steinar Holden: "Monetary regime and the co-ordination of wage setting". Arbeidsnotat 2000/1. 38 pp. ISSN 0801-2504. ISBN 82-7553-157-8.

International comparisons show that countries with coordinated wage setting generally have lower unemployment than countries with less co-ordinated wage setting. This paper argues that the monetary regime may affect whether co-ordination among many wage setters is feasible. A strict monetary regime, like a countryspecific inflation target, to some extent disciplines wage setters, so that the consequences of uncoordinated wage setting are less detrimental than under a more passive monetary regime (eg a monetary union). Thus, the gains from co-ordination are larger under a passive regime. Under some circumstances a passive regime may induce cooperation in wage setting, and thus lower unemployment, when a stricter regime would not.

JEL classification: E24, J5, E52.

Keywords: wage setting, co-ordination, equilibrium unemployment, monetary regime, monetary union.

Kai Leitemo: "Open-economy inflation forecast targeting". Arbeidsnotat 2000/2. 36 pp. ISSN 0801-2504. ISBN 82-7553-158-6.

The paper shows that the procedure of inflation forecast targeting arguably implemented by Sveriges Riksbank and the Bank of England may lead to high nominal and real variability; the latter being manifested most notably in the traded sector. A long inflation forecast targeting horizon results in extensive smoothing of interest rate movements. This implies only weak nominal interest rate responses to disequilibrium conditions, causing the real interest rate and hence the real exchange rate to fluctuate persistently. The paper offers an explanation for the recent large variability of Swedish inflation and UK manufacturing sector output.

JEL classification: E52, E47, E43.

Keywords: inflation targeting, forecast targeting, monetary policy, small open economy.

Gunnar Bardsen and Ragnar Nymoen: "Testing steady-state implications for the NAIRU". Arbeidsnotat 2000/3.22 pp. ISSN 0801-2504. ISBN 82-7553-159-4. Estimates of the NAIRU are usually derived either from a Phillips curve or from a real wage curve in an incomplete competition model. This paper investigates the correspondence between the operational NAIRU concepts and the steady state of a dynamic wage-price model. We derive the parameter restrictions that secure that correspondence. The full set of restrictions can be tested by econometric analysis of the wage-price system, and this method is demonstrated for Norwegian data. A set of necessary conditions can be tested from estimated "wage-curves" alone. Existing international evidence from empirical wage equations are re-interpreted in light of these conditions.

Keywords: Phillips curve, steady state, natural rate, NAIRU, dynamic modelling, correspondence principle.

Kai Leitemo and Oistein Roisland: "The choice of monetary policy regime for small open economies "Arbeidsnotat 2000/5.37 pp. ISSN 0801-2504. ISBN 82-7553-162-4.

The paper analyses alternative monetary policy regimes within a simple, estimated macroeconomic...