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Title:Inflation Targeting Is a Success, So Far: 100 Years of Evidence from Swedish Wage Contracts PDF Logo
Authors:Jonung, Lars
Fregert, Klas
Issue Date:2008
Citation:[Journal:] Economics: The Open-Access, Open-Assessment E-Journal [Volume:] 2 [Issue:] 2008-31 [Pages:] 1-25 [DOI/URN:] doi:10.5018/economics-ejournal.ja.2008-31
Abstract:We evaluate the Swedish inflation targeting regime adopted in 1993−1995 using a novel approach based on a unique data set on the characteristics of collective wage agreements between 1908 and 2008. We find that the inflation targeting regime of 1995−2008 stands out as an exceptionally stable policy regime as judged by the willingness of wage contract-makers to repeatedly commit to three-year non-indexed wage agreements. Inflation targeting gained instant credibility in the sense that the labor market organizations entered long-term wage agreements at the same time as this new regime was announced. Inflation targeting has thus reduced macroeconomic uncertainty compared to previous regimes adopted in Sweden, including the gold standard before and after World War I, the price level targeting of the 1930s, the Bretton Woods period of fixed exchange rates. As judged by the reactions of the labor market participants, inflation targeting in Sweden is a success¯at least so far.
Subjects:Inflation targeting
policy regime
contract length
wage indexation
Lucas critique
Sweden
credibility
JEL:E30
E42
E65
Persistent Identifier of the first edition:doi:10.5018/economics-ejournal.ja.2008-31
Creative Commons License:http://creativecommons.org/licenses/by-nc/2.0/de/deed.en
Document Type:Article
Appears in Collections:Economics: The Open-Access, Open-Assessment E-Journal - Journal Articles

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