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Overvalued: Swedish monetary policy in the 1930s


Rathke, Alexander; Straumann, Tobias; Woitek, Ulrich (2017). Overvalued: Swedish monetary policy in the 1930s. International Economic Review, 58(4):1355-1369.

Abstract

The article discusses Sweden's monetary policy in the 1930s, which has been hailed as the first and only example of successful price-level targeting. Our contribution is twofold. First, we argue that the crucial measure that immediately ended deflationary expectations and enabled a swift recovery was a strong and involuntary devaluation of the currency, not the adoption of a new monetary policy framework. Second, starting from the recent literature on monetary policy at the zero-lower bound, we conclude that Sweden's exchange rate policy is more relevant for the current discussion than its tentative experience with price-level targeting.

Abstract

The article discusses Sweden's monetary policy in the 1930s, which has been hailed as the first and only example of successful price-level targeting. Our contribution is twofold. First, we argue that the crucial measure that immediately ended deflationary expectations and enabled a swift recovery was a strong and involuntary devaluation of the currency, not the adoption of a new monetary policy framework. Second, starting from the recent literature on monetary policy at the zero-lower bound, we conclude that Sweden's exchange rate policy is more relevant for the current discussion than its tentative experience with price-level targeting.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:November 2017
Deposited On:05 Dec 2017 11:52
Last Modified:19 Feb 2018 09:32
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:0020-6598
Additional Information:See also Working paper series / Department of Economics No. 58: http://www.zora.uzh.ch/id/eprint/54331/. This is the peer reviewed version of the following article: "Overvalued: Swedish monetary policy in the 1930s", which has been published in final form at dx.doi.org/10.1111/iere.12254. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving (http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms).
OA Status:Closed
Publisher DOI:https://doi.org/10.1111/iere.12254

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