Swedish Inflation

Please cite this paper as:

Hüfner, F. (2007), “Why has Swedish Inflation been
Persistently Low?”, OECD Economics Department Working
Papers, No. 560, OECD Publishing. http://dx.doi.org/10.1787/173338505703 OECD Economics Department
Working Papers No. 560

Why has Swedish Inflation been Persistently Low?
Felix Hüfner

Unclassified

ECO/WKP(2007)20

Organisation de Coopération et de Développement Economiques
Organisation for Economic Co-operation and Development

11-Jun-2007
___________________________________________________________________________________________
_____________
English text only
ECONOMICS DEPARTMENT

ECO/WKP(2007)20
Unclassified
WHY HAS SWEDISH INFLATION BEEN PERSISTENTLY LOW?
ECONOMICS DEPARTMENT WORKING PAPER No. 560

By Felix Hüfner

All OECD Economics Department Working Papers are available on the OECD Internet webiste at www.oecd.org/eco/working_papers English text only

JT03228924

Document complet disponible sur OLIS dans son format d 'origine
Complete document available on OLIS in its original format

ECO/WKP(2007)20
Abstract
Why has Swedish inflation been persistently low?
Average inflation in Sweden has been one of the lowest among European countries since the mid1990s. Three supply-side factors help to explain this phenomenon, all related in some sense to increased global integration. First, a shift towards imports from low-cost producing countries has resulted in falling import prices. Second, deregulation and increased product market competition with foreign companies entering the market has led to price falls in some sectors, notably in retailing. Third, wage growth has lagged productivity and kept unit labour costs down. This paper reviews these factors and analyzes the policy options for the central bank.
This paper relates to the OECD Economic Survey of Sweden 2007
(www.oecd.org/eco/surveys/sweden).
JEL classification: E31, E52
Key words: Inflation, Core Inflation, Sweden, Monetary Policy, Inflation Targeting, Riksbank
*****

Bibliography: Ball, L. (2006), “Has Globalization Changed Inflation?”, NBER Working Paper 12687. Bank of England (2006), “The Macroeconomic Impact of Migration (Box)”, Inflation Report, November. BIS (2006), 76th Annual Report, Basle. Bean, C. (2006), “Comment on Ken Rogoff: ‘Impact of Globalisation on Monetary Policy’”, Federal Reserve Bank of Kansas City, Annual Economic Symposium 2006. Catte, P. and T. Slok (2005), “Assessing the Value of Indicators of Underlying Inflation for Monetary Policy”, OECD Economics Department Working Paper 461, OECD, Paris. Dumont, M., G. Rayp, P. Willemé (2006), “Does Internationalization Affect Union Power? An Empirical Study for Five EU Countries”, Oxford Economic Papers, Vol ECB (2005), “Asset Price Bubbles and Monetary Policy”, Monthly Bulletin, April 2005. Giavazzi, F., F.S. Mishkin (2006), An Evaluation of Swedish Monetary Policy 1995-2005, Reports from the Riksdag 2006/07:RFR 1, Committee on Finance, Stockholm. Gurkaynak, R., A.T. Levin, E.T. Swanson (2006), “Does Inflation Targeting Anchor Long-Run Inflation Expectations? Evidence from Long-Term Bond Yields in the U.S., U.K., and Sweden”, Federal IMF (2006), World Economic Outlook, May. Ingves, S. (2006), “The Inflation Target and Monetary Policy”, Speech at the Swedish Economics Association, 4 April. Kahn, G.A. (2007), “Communicating a Policy Path: The Next Frontier in Central Bank Transparency?”, Federal Reserve Bank of Kansas City Economic Review, 2007:01, pp King, M. (2005), “Monetary Policy: Practice Ahead of Theory”, Mais Lecture, London, 17 May. Kohn, D. (2006a), “Reflections on Globalisation and Policies”, Speech at the European Economics and Financial Centre Seminar, London, 6 July. Kohn, D. (2006b), “Monetary Policy and Asset Prices”, Speech at the colloquium “Monetary Policy: A Journey from Theory to Practice”, Frankfurt, March 16. Konkurrensverket (2004), Competition in Sweden 2004, Stockholm. Konkurrensverket (2005), Competition in Sweden 2005, Stockholm. 18 ECO/WKP(2007)20 Linnhag, A. (2006), Konkurrensen inom dagligvaruhandeln (Competition in Retail Trade), mimeo Sveriges Rigsdag. McKinsey (2006), Sweden’s Economic Performance: Recent Development, Current Priorities, Stockholm. OECD (1999), OECD Economic Survey of Sweden, OECD, Paris. OECD (2004), OECD Economic Survey of Sweden, OECD, Paris. OECD (2007a), Regulatory Reform in Sweden: Achieving Results for Sustained Growth, OECD, Paris, forthcoming. OECD (2007b), OECD Economic Survey of Sweden, OECD, Paris. Pain, N., I. Koske and M. Sollie (2006), “Globalisation and Inflation in the OECD Economies”, OECD Economics Department Working Paper 524, OECD, Paris. Posen, A. and D.P. Gould (2006), “Has EMU had any Impact on the Degree of Wage Restraint?”, CESifo Working Paper No Przybyla, M. and M. Roma (2005),”Does Product Market Competition Reduce Inflation? Evidence from EU Countries and Sectors”, ECB Working Paper No Riksbank (2005), “Why are Swedish import prices so low?”, Inflation Report 2005:2, Riksbank, Stockholm. Riksbank (2006a), Monetary Policy in Sweden, Riksbank, Stockholm. Riksbank (2006b), “Material for Assessing Monetary Policy 2003-2005”, Inflation Report 2006:1, Riksbank, Stockholm. Riksbank (2007), Monetary Policy Report 2007:01, Riksbank, Stockholm. Rogoff, K. (2006), “Impact of Globalisation on Monetary Policy”, Federal Reserve Bank of Kansas City, Annual Economic Symposium 2006. Rosenberg, I. (2005), “Why is Swedish inflation so low?”, Speech on 13 April, Stockholm. 19 ECO/WKP(2007)20