DP1103 The Swedish Experience of an Inflation Target

Author(s): Lars E.O. Svensson
Publication Date: January 1995
Keyword(s): Floating Exchange Rates, Monetary Policy
JEL(s): E32, F33, F41
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1103

The paper gives a brief account of the Swedish experience of an inflation target in a floating exchange rate regime; identifies, documents and discusses the current problems in Swedish monetary policy and their origins; suggests what can be done to remedy the problems; and draws some general conclusions. The two main current problems are the lack of credibility of the target and the significant risk that the target will be missed. The reasons for the lack of credibility include the fiscal situation, the institutional set-up of monetary policy, the political division about monetary policy, and the insufficient transparency of and commitment to the current inflation-targeting policy.