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Reform Capacity and Macroeconomic Performance in the Nordic Countries$
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Torben M. Andersen, Michael Bergman, and Svend E. Hougaard Jensen

Print publication date: 2015

Print ISBN-13: 9780198717102

Published to Oxford Scholarship Online: March 2015

DOI: 10.1093/acprof:oso/9780198717102.001.0001

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Monetary Policy and Exchange Rate Stabilization in Norway and Sweden

Monetary Policy and Exchange Rate Stabilization in Norway and Sweden

Chapter:
(p.136) 6 Monetary Policy and Exchange Rate Stabilization in Norway and Sweden
Source:
Reform Capacity and Macroeconomic Performance in the Nordic Countries
Author(s):

Hilde C. Bjørnland

Junior Maih

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780198717102.003.0010

This chapter focuses on a comparison of monetary and exchange rate policies in Norway and Sweden. Comparing the performance of key macroeconomic indicators, the chapter analyses the role of monetary policy in stabilizing the economy and the extent to which monetary policy has contributed to exchange rate stability. It is found that while terms of trade volatility is about five times as high in Norway as in Sweden, other key variables such as inflation and interest rates have about the same volatility in the two countries. This suggests that monetary policy is used more actively in Norway than in Sweden. The empirical evidence supports this conclusion. Norges Bank has actively stabilized the value of the NOK both before and after the adoption of inflation targeting. By contrast, the Riksbank has, since the adoption of inflation targeting, reduced its response to output and the exchange rate.

Keywords:   monetary policy, exchange rates, regime switching, inflation targeting, Norway, Sweden

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