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

Published online by Cambridge University Press:  01 August 2009

TOBIAS STRAUMANN  and
ULRICH WOITEK
TOBIAS STRAUMANN
Affiliation:
University of Zurich, Department of Economics, Winterthurerstrasse 30 Zurich, Zurich 8006, Switzerland, straumann@iew.unizh.ch
ULRICH WOITEK
Affiliation:
University of Zurich, Department of Economics, Winterthurerstrasse 30 Zurich, Zurich 8006, Switzerland, straumann@iew.unizh.ch
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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.

Type
Research Article
Information
European Review of Economic History , Volume 13 , Issue 2 , August 2009 , pp. 251 - 282
Copyright
Copyright © European Historical Economics Society 2009

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