The agents in the model also have rational expectations, that is, they use the information available in the best possible way when they make their decisions. This type of model is usually referred to in the research literature under the generic term of New Keynesian DSGE models. 7 The methods have been developed in close cooperation between academic researchers and economists at central banks who have exchanged ideas and experiences. The Riksbank has developed its own macro model for the Swedish economy At the Riksbank we have developed a dynamic macro model for the Swedish economy which is known as Ramses. 8 This is a so-called general equilibrium model and belongs to the group of New Keynesian DSGE models. General here means that it tries to explain the whole economy and not merely a particular section of it, such as private consumption or the labour market. The fact that it is an equilibrium model means that it assumes that market mechanisms create a balance between supply and demand in the different markets of the economy. Ramses is currently used to make forecasts, to interpret economic developments and to calculate the effects of monetary policy, for example. Some areas are not yet very well developed in Ramses. This includes, for example, fiscal policy and the credit market. We therefore use partial models that focus on certain individual variables as a complement to Ramses. We also use so-called Bayesian VAR models.
But before the minutes are published it is the majority line that applies when we Executive Board members make speeches outside of the Riksbank. After that we members are each free to describe our personal differences of opinion regarding the interest rate decision. Constant assessment means that we are always prepared for change Let me round off. Today I have talked about the major changes in recent years in the way we produce material used as a base for our interest rate decisions. Some of these have come about because the methods of making forecasts in general have developed, something that also affects other central banks. Other changes have been shaped by the specific conditions that apply in Sweden. The Riksbank’s independent position makes demands on us to be open and clear, what economists usually term transparency. The Riksbank’s decision to begin publishing its own forecasts for the repo rate is a step in the work on increasing transparency and further improving our analysis. 10 The new assumption for the repo rate has led to the Executive Board becoming more involved in the forecasting process. We are constantly evaluating our forecasts to see how successful they are at capturing developments. This also means we are constantly striving to improve our ways of working. If we make any major changes that have significance for our forecasts we will of course let you know.