Sveriges Riksbank Economic Review 2008:2

Date 18/06/2008

At the beginning of June the Riksbank announced that it would phase out use of the CPIX underlying inflation measure. In the article ”Why do we need a measure of underlying inflation” authors Jesper Hansson, Jesper Johansson and Stefan Palmqvist note that there is a need to analyse different measures of underlying inflation even though the Riksbank’s inflation target is defined in terms of the annual rate of increase in the CPI. A good measure of underlying inflation should have the same mean value as the CPI and provide an indication of lasting inflationary pressures.It is also of interest to study measures that adjust for the direct effects of monetary policy. The authors show that the CPIX, which the Riksbank has to date used for this purpose, no longer fulfils the requirements. The article presents a measure that better adjusts for for the direct effects of changes in interest rates.

 

In the article “Can the authorities manage crises in the financial system?” authors Stefan Ingves and Johan Molin discuss the regulations for managing financial institutions in distress and the challenges facing the authorities – in Sweden and internationally. There are a number of parallels between the current financial turmoil and the Swedish bank crisis of the 1990s. To cope with financial institutions in distress, effective regulations and institutions need to be put in place. The banks’ increasing cross-border activities mean that international cooperation must also be intensified.

 

A balanced use of withdrawal fees for cash and transaction fees for cards could result in more efficient use of the payment system in Sweden. Cash payments tend to be more expensive than card payments, and the results indicate that cash is over-used, according to authors Mats Bergman, Gabriela Guibourg and Björn Segendorf in their article “Card and cash payments from a social perspective”.

 

Stress tests have become an integral tool for banks’ risk management practices as well as for financial stability assessments by central banks according to Mathias Drehmann in his article “Stress tests: Objectives, challenges and modelling choices”. But there has been no debate about the objectives of stress tests, even though an understanding of those is essential when building and evaluating stress testing models.

 

The journal is available as a PDF file on the Riksbank’s website under the heading Publications/Published/Economic Review. It can also be collected from the main entrance to the Riksbank at Brunkebergstorg 11 or ordered by e-mail, forradet@riksbank.se, fax +46 8 787 05 26 or telephone +46 8 787 00 00.