Sweden

Sweden for many years pegged its exchange rate more or less strictly but it experienced a banking crisis in 1991-2 and had to drop its peg to the ECU in late 1992; it then embarked on inflation targeting.

Years Targets and attainment Classification
1974-84 1974-7 currency associated with Snake, devaluations 1976 and 1977 and then exit; 1978-84 pegged to announced basket (wider than ECU) with unannounced margins of 2.5%, devaluations 1981 and 1982; monetary policy operated via rediscount facilities, OMOs, liquidity and cash ratios, and occasional credit ceilings; recurring monetary financing of budget deficits loose exchange rate targeting LERT
1985-92 1985-90 currency pegged to basket with 1.5% announced margins; from May 1991 pegged to ECU, a harder anchor (with same margins); exit from peg despite strong resistance to intense speculative pressure November 1992; banking crisis 1991-2; financial liberalisation including in 1985-86 issues of new short-term government paper, freeing of bank lending rates and abolition of credit guidelines, and from 1988 more flexible rediscount facilities, with shift towards interest rates (interbank overnight rate) as main policy instrument full exchange rate targeting FERT
1993-2014 inflation target announced January 1993 for 1995 and after, with policy in 1993-4 to prevent rise in inflation; Inflation Reports published from October 1993; from June 1994 main instrument is repo rate within corridor; some ongoing refinements to inflation targeting procedures; on annual averages targets met or near-met 17 years out of 20, undershoots 2009 (with inflation expectations anchored), and 2013-14 (inflation expectations fall but still within 1% of inflation target) full inflation targeting FIT

Selected IMF references: RED 1978 pp46-8; RED 1980 p57; RED 1986 pp38-9, 56, Appendix IV;  SR 1991 pp4, 6; RED 1993 pp13-17, 20; SR 1993 pp6, 12-13; SR 1994 pp13-15; SI 1996 pp18-20; SI 1999 pp60-8; SR 2004 p10; SR 2009 pp21, 38; SR 2010 pp24-5; SR 2015 p6.

Additional sources: Houben (2000, especially pp214-17, 322-3).

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