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


Straumann, Tobias; Woitek, Ulrich (2008). A pioneer of a new monetary policy? Sweden's price level targeting of the 1930s revisited. Working paper series / Institute for Empirical Research in Economics No. 386, University of Zurich.

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.

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.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
06 Faculty of Arts > Institute of History
Dewey Decimal Classification:900 History
330 Economics
Language:English
Date:August 2008
Deposited On:29 Nov 2011 22:47
Last Modified:12 Aug 2017 13:06
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html

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