Norges Bank

Models for monetary policy analysis (NEMO)

NEMO is based on the assumption that Norway with a national currency can determine its own inflation rate over time. Therefore, a model requirement is that monetary policy anchors inflation expectations and brings inflation back to target. In the model, it is assumed that economic agents take monetary policy into account and look ahead when making decisions concerning consumption, investment, wages and prices.

NEMO is a new-Keynesian DSGE model (dynamic stochastic general equilibrium model) with Keynesian features in the short to medium term and classical features in the long term. This means that due to the stickiness of prices and wages monetary policy can influence demand and thereby output and employment in the short and medium term. In the long term, however, output is determined by technology, preferences and the supply of factor inputs. NEMO is estimated using Norwegian data as a system based on a Bayesian approach.


Edited 13 March 2019 14:48
Edited 13 March 2019 14:48