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

Tobias Straumann and Ulrich Woitek

European Review of Economic History, 2009, vol. 13, issue 2, 251-282

Abstract: The article 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, although in practice giving priority to exchange-rate stabilisation. Based on Bayesian econometric techniques and the evaluation of new archival sources, we come to the conclusion that defending a fixed exchange rate is hard to reconcile with the claim of adopting price-level targeting. This finding has implications for the prevailing view of the 1930s as a decade of great policy innovations.

Date: 2009
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