Sveriges Riksbank Economic Review 2009:1

Date 23/03/2009

In this year's first issue of the Riksbank's journal "Economic Review", Lars E. O. Svensson presents a number of personal views and reflections on transparency following his first 18 months as Deputy Governor of the Riksbank. In the article "Transparency under Flexible Inflation Targeting: Experiences and Challenges" he addresses experiences and challenges relating to flexible inflation targeting. He discusses the role of transparency in relation to inflation targeting and committee decisions on policy rate paths. He also reports on the Riksbank's management of interest rate expectations and discusses several aspects of publishing attributed minutes. He concludes by mentioning future developments and improvements in transparency and flexible inflation targeting that he believes would be desirable.

 

In the article "The decision–making process – how the Executive Board of the Riksbank decides on the repo rate", Kerstin Hallsten and Sara Tägtström describe the changes made in recent years in the way that the background material for the Riksbank's repo rate decisions is produced. The authors note that some of these changes stem from the fact that forecasting methods have been developed. Other changes have arisen as a result of the specific conditions that apply in Sweden where the independent position of the Riksbank demands a high degree of transparency. The Riksbank’s decision to begin publishing its own forecasts for the repo rate is a step towards increasing transparency and further improving its analysis.

 

In the article "The new macro models: washing our hands and watching for icebergs", Jon Faust discusses how we can minimise the risk of repeating the mistakes made in the 1960s when the central banks began to use macro models. His point of departure is the statement that the introduction of new technologies, models and approaches is often followed by disastrous mistakes that can be avoided. The author notes that it would be silly to refrain from the enormous advantages that a rapid application of new macro models can provide. It would be equally silly to ignore history, which shows that disastrous mistakes often follow developments like this. (This article is published only in English.)

 

A discussion of the impact of hedge funds is a recurring feature of every financial crisis. Even though the course of events in previous crises may have been very different, the criticism of hedge funds tends to be the same. In the article "Hedge funds and financial crises", Maria Strömqvist discusses the impact that hedge funds have on financial crises. The discussion is conducted in an historical perspective and in relation to the current crisis. The claim that hedge funds in general have a greater impact on financial crises than other investors is not, however, supported by the analysis.

 

The mandate of the IMF is today oriented more towards preventing and managing current account crises than capital account crises. This is not perfectly fitted to a world where monetary and financial issues are increasingly intertwined and where the risk is greater that an economic crisis will originate in the financial sector than in the real sector. In the article "IMF Financial Sector Surveillance", Björn Segendorf and Åsa Ekelund discuss how the IMF can adapt its surveillance of the global economy to better capture the new economic picture.

 

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, kontorsservicecenter@riksbank.se, fax +46-8-787 05 26 or telephone +46-8-787 00 00.