The Return of the Original Phillips curve? An Assessment of Lars E. O. Svensson's Critique of the Riksbank's Inflation Targeting, 1997-2012
We examine Lars E O Svensson's prominent critique of the monetary policy of the Sveriges Riksbank (the Swedish central bank) from 1995-2012. Our main objection concerns Svensson's conclusion that the original pre-Friedman/Phelps version of the Phillips curve based on constant inflation expectations has returned for Sweden. Based on estimates of this model, Svensson claims that that the Riksbank's