New issue of the Riksbank's journal Economic Review


The Riksbank’s journal Economic Review discusses subjects related to central banking. This year’s second issue of Sveriges Riksbank Economic Review contains the following articles:


Monetary policy and financial stability – some future challenges
By Stefan Ingves, Mikael Apel and Erik Lenntorp

The financial crisis had functioned as a catalyst for a discussion on reassessment and renewal. The spotlight has primarily been focused on the work of maintaining financial stability, but the crisis has also raised the issue of whether there may be lessons to be learned for monetary policy. This article discusses some of the challenges central banks will be facing in coming years, for example, assessing how financial regulations following in the wake of the crisis will affect the transmission mechanism of monetary policy, and what role regulations and monetary policy can play in counteracting creditdriven imbalances on the property market.


After the crisis – towards a more stable financial system
By Lars Nyberg and Tom Andersson

The regulation of the financial system is an issue that becomes front-page news in every financial crisis. Naturally, the crisis we have recently been through is no exception. All sorts of recipes have been suggested for a more stable financial system, some more appetising than others. However, one view that the great majority share is that the rules of the game need to be tightened up. The only questions are how much and in which manner.


Money Market Funds and Financial Stability
By Gudrun Gunnarsdottir and Maria Strömqvist

The financial crisis, in particular the collapse of Lehman Brothers, has revealed that money market funds are more risky than had previously been believed. We discuss the importance of money market funds for financial stability and whether situations similar to those in the US and Icelandic markets could arise in Sweden. We find that there are similarities between the Swedish and Icelandic funds, but few similarities with the US funds. In Sweden, as was the case in Iceland, the assets under management are concentrated in a few funds and the connection to the major banks is strong. However, given the relatively small size of the money market funds in Sweden, we do not find that they, in isolation, are of major systemic importance as a source of funding for the Swedish banks. The funds are more likely to have a systemic impact through spill-over effects on the banking system, especially in a market already characterised by high uncertainty and risk aversion. The money market funds are thus more important to certain parts of the financial market, such as the market for corporate commercial paper and covered bonds.


Future system for EU supervision – will it work?
By Tom Andersson

In the wake of the recent crisis, the EU has launched an ambitious project to reform the supervision of financial markets and institutions in the EU. By setting up a partly new regulatory framework and a new institutional structure for the supervision of risks on the European financial markets, the EU’s intention is to improve its capacity to identify, prevent and manage future crises. This article presents and discusses the proposed reforms that are intended to be implemented already next year. The conclusion is that even if the reforms entail a significant improvement, they do not constitute a perfect solution for fostering and financial stability on the integrated financial markets of Europe. The creation of a sustainable supervisory framework requires more far-reaching reforms. Moreover, if the goal is to establish a single market for financial services a higher degree of centralised supervision and crisis management will be needed – at least for the financial companies that conduct extensive cross-border operations.

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