OVERVALUED: SWEDISH MONETARY POLICY IN THE 1930s

The article discusses Sweden's monetary policy in the 1930s, which has been hailed as the first and only example of successful price-level targeting. Our contribution is twofold. First, we argue that the crucial measure that immediately ended deflationary expectations and enabled a swift recovery was a strong and involuntary devaluation of the currency, not the adoption of a new monetary policy framework. Second, starting from the recent literature on monetary policy at the zero-lower bound, we conclude that Sweden's exchange rate policy is more relevant for the current discussion than its tentative experience with price-level targeting.