New issue of the journal Economic Review

Date 07/06/2012

The globalisation of trade and financial flows is a process that has been going on for a long time, which has an impact on the pricing of goods and services and on the functioning of the financial system. This certainly applies to Sweden, as the Swedish economy is very much affected by developments abroad.

 

• Auer, Fischer and Kropp analyse how producer prices in Sweden, Denmark and Finland have been affected by the increase in Chinese exports to these countries. They find that China's growing market share has contributed to dampening prices in the Nordic countries, what is known as a positive supply shock, and they discuss the possible implications of this fact for monetary policy.
  
  
• Eklund, Milton and Rydén describe how the Swedish banks fund their lending in Swedish krona (for instance, mortgages) by converting loans in foreign currency into Swedish krona on the currency swap market. They show how the currency swap market functions, the risks that can arise on this market and how these risks can be minimised.

In a short-term perspective the economies of many industrial nations still are weighed down by the repercussions of the recent global financial crisis and the sovereign debt crisis following in its wake. This raises a number of questions concerning the relationship between monetary policy and financial stability policy.

 

• Sellin and Åsberg Sommar describe the Riksbank's operational framework for implementing monetary policy and analyse how this system functioned during the financial crisis. The operational framework, which is designed to stabilise the interbank overnight rate, worked well during the crisis. At the same time, the financial crisis showed that there may be good reason for the Riksbank to add to its toolkit to be better equipped to meet financial shocks that affect interest rate-setting on other markets than the overnight market.
  
  
• Apel and Claussen focus on the recently much-discussed theory that low policy rates lead to banks and other financial institutions taking greater risks, that is, monetary policy also has an impact through a so-called risk-taking channel. They observe that there is international empirical evidence to support the theory that low interest rates lead to increased risk-taking. They also highlight several questions to which no clear answers have been provided in the research, and which require further investigation.