Heeringa and Lindh compare the experience of the Netherlands and Sweden with fiscal rules and procedures. They note that the two countries are relatively small open economies vulnerable to negative external economic developments and have remarkably similar budgetary experience. In both...

The combination of discretionary monetary policy, labor-market distortions and nominal wage rigidity yields an inflation bias as monetary policy tries to exploit nominal wage contracts to address labour-market distortions Although an inflation target eliminates this inflation bias, it creates a...