The quest for economic stability: a study on Swedish stabilisation policies 1873–2019

Abstract

This paper explores the evolution of Swedish stabilisation policies through six policy regimes between 1873 and 2019. We focus on discretionary policy decisions by estimating policy shocks using a SVAR model. Through these shocks, we explore how stabilisation policies have evolved over time and how policymakers responded to key economic events such as financial crises and wars. Our results show three key results (i) policies are often a source of destabilisation rather than stabilisation, (ii) regimes are designed for a specific time and ends when economic circumstances change, and (iii) fixed exchange rates worsen the economic effects of financial crises.