Pioneering price level targeting: The Swedish experience 1931–1937

Abstract

In September 1931, Sweden became the first country to make the stabilization of the domestic price level the official goal of its monetary policy, actually the only country that so far has adopted such an explicit price level target. Starting from the issues and concepts familiar from research and policy experience of inflation targeting -as contrasted to price level targeting -this paper examines the evolution of the Swedish price level targeting in the 1930s. We bring out a number of similarities and differences between price stabilization in the 1930s and in the 1990s.

Deflation and Monetary Policy in a Historical Perspective: Remembering the Past or Being Condemned to Repeat It?

“…Sweden successfully followed a price norm in the 1930's, gearing its monetary policy to stabilize a price index. In many respects, this was an attempt to mimic the price stabilization features of the gold standard while eliminating the volatility produced by shocks to the gold market, as advocated by Fisher, Wicksell and Marshall (Bordo (1984), Berg and Jonung (1999), Fregert and Jonung (2001)). Presumably, a credible commitment to such a policy could anchor expectations in a way similar to adherence to a commodity standard.…”

Inflation Targeting is a Success, so Far: 100 Years of Evidence from Swedish Wage Contracts

“…The economists' answers can be interpreted as a contribution to the present debate on changes in the monetary regime and inflation targeting. See Jonung (1979) and Berg and Jonung (1999).…”

A Pioneer of a New Monetary Policy? Sweden's Price Level Targeting of the 1930s Revisited

“…Besides contemporary scholars, only Lars Jonung and his collaborators have seriously approached the topic (Jonung 1979a, 1979b, Berg and Jonung 1999, Fregert and Jonung 2004. 1 This new research has led to a revision of Fisher's enthusiastic view.…”

“…The crucial question, however, is whether or not this discussion had any practical meaning for the policy of the Riksbank. Berg and Jonung (1999) as well as Fregert and Jonung (2004) (Jonung 1991). But as shown below, the narrative sources clearly suggest that the governor was by far the most influential figure.…”