New issue of the Riksbank's journal Economic Review

Date 17/11/2009

This year’s third issue of Sveriges Riksbank Economic Review contains the following articles:

 

“The Swedish Money Market Risk Premium – Experiences from the Crisis” by Albina Soultanaeva and Maria Strömqvist

This paper analyses the extent to which the Swedish money market risk premium has been affected by the current financial turmoil. We also examine the impact of shocks transmitted from the US and European markets in more detail. Our results indicate that the Swedish market has been significantly affected by shocks from the US market, but not from the European market. The findings also reveal that the main driver of the money market risk premium in the first part of the crisis was liquidity risk. However, during the latter part of the crisis, there has been a shift from liquidity risk to credit risk. This has specific policy implications for central banks.

 

“Forecasters’ ability – what do we usually assess and what would we like to assess?” by Michael K. Andersson and Ted Aranki

In this article, we propose a method for the comparison of various forecasters’ ability. One problem in comparing forecasts is that forecasts are prepared at different points in time. This means that forecasts are based on differing amounts of information. The closer one comes to the outcome date for the variable being forecast, the more information the forecaster has regarding the development of the variable. Consequently, a comparison of the accuracy of forecasts should allow adjustments to be made for such differences. We achieve this by simultaneous estimation of the forecasters’ ability and the effects of the amount of information. The proposed method of comparison is applied to a body of data covering ten Swedish forecasters. This data covers the period 1999–2008. We examine the importance of the amount of information and the ability of the various forecasters for the entire period and for a specific year, namely 2008, which is the most recent year for which we have an outcome.

 

“Wage formation in Sweden” by Kent Friberg

The development of wages in an economy can have an impact on inflation and as it is the objective of the Riksbank to keep inflation at a low and stable level we have to regularly analyse and produce forecasts for wage development. Historically, wages and prices in Sweden have covaried fairly well. However, instability in price and wage formation, for example in the form of upward or downward price-wage spirals, can occur in an economy for various reasons. The aim of this article is to provide a greater understanding of how instability in price and wage formation can arise, but also of how the Swedish wage-formation model works. The article analyses wage formation in Sweden from the historical, institutional and international perspectives. It also presents an econometric model for wage formation that makes it possible to analyse how a number of factors affect wage formation in the Swedish economy. This model shows that the situation on the labour market and the collective agreements between the central employee and employer organisations are of great significance for wage formation in the short term.

 

”Anchoring Fiscal Expectations” by Eric M. Leeper

In this lecture, I argue that there are remarkable parallels between how monetary and fiscal policies operate on the macro economy and that these parallels are sufficient to lead us to think about transforming fiscal policy and fiscal institutions as many countries have transformed monetary policy and monetary institutions. Making fiscal transparency comparable to monetary transparency requires fiscal authorities to discuss future possible fiscal policies explicitly. Enhanced fiscal transparency can help anchor expectations of fiscal policy and make fiscal actions more predictable and effective. As advanced economies move into a prolonged period of heightened fiscal activity, anchoring fiscal expectations will become an increasingly important aspect of macroeconomic policy.