A pioneer of a new monetary policy? Sweden’s price level targeting of the 1930s revisited
AbstractThe paper re-examines Sweden’s price level targeting during the 1930s which is regarded as a precursor of today’s inflation targeting. According to conventional wisdom the Riksbank was the first central bank to adopt price level targeting as the guideline for its activities, although in practice giving priority to exchange rate stabilisation over price level stabilisation. On the basis of econometric analysis (Bayesian VAR) and the evaluation of new archival sources we come to a more skeptical conclusion. Our results suggest that it is hard to reconcile the Riksbank’s striving for a fixed exchange rate with the claim that it adopted price level targeting. This finding has implications for the prevailing view of the 1930s as a decade of great policy innovations.
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Bibliographic InfoPaper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 386.
Date of creation: Aug 2008
Date of revision:
Sweden; monetary policy; price level targeting; Great Depression;
Other versions of this item:
- Straumann, Tobias & Woitek, Ulrich, 2009. "A pioneer of a new monetary policy? Sweden's price-level targeting of the 1930s revisited," European Review of Economic History, Cambridge University Press, vol. 13(02), pages 251-282, August.
- N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-05 (All new papers)
- NEP-CBA-2008-09-05 (Central Banking)
- NEP-HIS-2008-09-05 (Business, Economic & Financial History)
- NEP-HPE-2008-09-05 (History & Philosophy of Economics)
- NEP-MAC-2008-09-05 (Macroeconomics)
- NEP-MON-2008-09-05 (Monetary Economics)
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