A new staff memo from the Swedish central bank examines how monetary policy affects GDP, unemployment, inflation, and exchange rates in ten small open economies during the inflation‑targeting period. Using a common framework, the authors—Mika Lindgren, Ingvar Strid, and Peiyu Wang—compare the transmission mechanisms across the countries. Their results are consistent with earlier empirical studies and do not show systematic differences between small and larger economies. In Sweden, the study finds that policy actions have a relatively large impact on inflation, mainly through the currency channel: a strengthening of the krona after a rate hike clearly contributes to lower price growth. The memo highlights the importance of understanding which channels drive the effects for central banks.
Source: Sveriges Riksbank.
Data reproduced from https://www.riksbank.se/ (open data).
Open data, freely available.
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