Lessons for Iceland from the Monetary Policy of Sweden
The purpose of this report is to derive lessons from inflation targeting in Sweden for the choice of the future monetary policy regime of Iceland. Swedish inflation targeting has been a success in terms of reducing inflation and inflation volatility, but real economic volatility is not lower compare...
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Lund: Lund University, School of Economics and Management, Department of Economics
2018
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ftzbwkiel:oai:econstor.eu:10419/260245 2023-12-31T10:08:07+01:00 Lessons for Iceland from the Monetary Policy of Sweden Andersson, Fredrik N. G. Jonung, Lars 2018 http://hdl.handle.net/10419/260245 eng eng Lund: Lund University, School of Economics and Management, Department of Economics Series: Working Paper No. 2018:16 gbv-ppn:1026062802 http://hdl.handle.net/10419/260245 RePEc:hhs:lunewp:2018_016 http://www.econstor.eu/dspace/Nutzungsbedingungen ddc:330 E42 E43 E44 E47 E52 E58 E62 Monetary policy inflation targeting financial stability Riksbank Sweden Iceland Central Bank of Iceland doc-type:workingPaper 2018 ftzbwkiel 2023-12-04T00:48:08Z The purpose of this report is to derive lessons from inflation targeting in Sweden for the choice of the future monetary policy regime of Iceland. Swedish inflation targeting has been a success in terms of reducing inflation and inflation volatility, but real economic volatility is not lower compared to previous periods. In addition, financial imbalances have grown rapidly. A key lesson is that the Riksbank has closely shadowed the policy of the European Central Bank due to financial integration. In other words, the Riksbank has behaved as if Sweden had a fixed exchange rate to the euro. Our analysis clearly indicates that a small economy cannot pursue an independent monetary policy from the rest of the world in a financially integrated world. Consequently, we suggest a fixed exchange rate arrangement for Iceland, preferably through a currency board. A currency board would provide exchange rate and price stability. A currency board would require domestic reforms to enhance price and wage flexibility as well as proper regulations on the financial system to minimize the risk of future banking crises. Report Iceland EconStor (German National Library of Economics, ZBW) |
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EconStor (German National Library of Economics, ZBW) |
op_collection_id |
ftzbwkiel |
language |
English |
topic |
ddc:330 E42 E43 E44 E47 E52 E58 E62 Monetary policy inflation targeting financial stability Riksbank Sweden Iceland Central Bank of Iceland |
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ddc:330 E42 E43 E44 E47 E52 E58 E62 Monetary policy inflation targeting financial stability Riksbank Sweden Iceland Central Bank of Iceland Andersson, Fredrik N. G. Jonung, Lars Lessons for Iceland from the Monetary Policy of Sweden |
topic_facet |
ddc:330 E42 E43 E44 E47 E52 E58 E62 Monetary policy inflation targeting financial stability Riksbank Sweden Iceland Central Bank of Iceland |
description |
The purpose of this report is to derive lessons from inflation targeting in Sweden for the choice of the future monetary policy regime of Iceland. Swedish inflation targeting has been a success in terms of reducing inflation and inflation volatility, but real economic volatility is not lower compared to previous periods. In addition, financial imbalances have grown rapidly. A key lesson is that the Riksbank has closely shadowed the policy of the European Central Bank due to financial integration. In other words, the Riksbank has behaved as if Sweden had a fixed exchange rate to the euro. Our analysis clearly indicates that a small economy cannot pursue an independent monetary policy from the rest of the world in a financially integrated world. Consequently, we suggest a fixed exchange rate arrangement for Iceland, preferably through a currency board. A currency board would provide exchange rate and price stability. A currency board would require domestic reforms to enhance price and wage flexibility as well as proper regulations on the financial system to minimize the risk of future banking crises. |
format |
Report |
author |
Andersson, Fredrik N. G. Jonung, Lars |
author_facet |
Andersson, Fredrik N. G. Jonung, Lars |
author_sort |
Andersson, Fredrik N. G. |
title |
Lessons for Iceland from the Monetary Policy of Sweden |
title_short |
Lessons for Iceland from the Monetary Policy of Sweden |
title_full |
Lessons for Iceland from the Monetary Policy of Sweden |
title_fullStr |
Lessons for Iceland from the Monetary Policy of Sweden |
title_full_unstemmed |
Lessons for Iceland from the Monetary Policy of Sweden |
title_sort |
lessons for iceland from the monetary policy of sweden |
publisher |
Lund: Lund University, School of Economics and Management, Department of Economics |
publishDate |
2018 |
url |
http://hdl.handle.net/10419/260245 |
genre |
Iceland |
genre_facet |
Iceland |
op_relation |
Series: Working Paper No. 2018:16 gbv-ppn:1026062802 http://hdl.handle.net/10419/260245 RePEc:hhs:lunewp:2018_016 |
op_rights |
http://www.econstor.eu/dspace/Nutzungsbedingungen |
_version_ |
1786840727593943040 |