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In Discussion Paper No. 1103, Research Fellow Lars Svensson
gives a brief account of the Swedish experience of an inflation target
in a floating exchange rate regime. The author 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. Lars E O Svensson Discussion Paper No. 1103, January 1995 (IM) |