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A pioneer of a new monetary policy? Sweden�s price level targeting of the 1930s revisited

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  • Tobias Straumann
  • Ulrich Woitek

Abstract

The 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.

Suggested Citation

  • Tobias Straumann & Ulrich Woitek, 2008. "A pioneer of a new monetary policy? Sweden�s price level targeting of the 1930s revisited," IEW - Working Papers 386, Institute for Empirical Research in Economics - University of Zurich.
    • Handle: RePEc:zur:iewwpx:386
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    References listed on IDEAS

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    JEL classification:

    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Systems; Standards; Regimes; Government and the Monetary System

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