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

Tobias Straumann and Ulrich Woitek

No 386, IEW - Working Papers from Institute for Empirical Research in Economics - 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.

Keywords: Sweden; monetary policy; price level targeting; Great Depression (search for similar items in EconPapers)
JEL-codes: E42 N14 (search for similar items in EconPapers)
Date: 2008-08
New Economics Papers: this item is included in nep-cba, nep-his, nep-hpe, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:zur:iewwpx:386

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