New issue of the journal Sveriges Riksbank Economic Review
Date
18/09/2013
In this issue of the Riksbank's journal you will find articles relating to both of our main tasks: monetary policy and financial stability.
Gabriela Guibourg, Christian Nilsson and Ulf Söderström report from a seminar that the Riksbank arranged in early 2013 and give an account of several complex issues that were the subject of intense discussion. How is the trade-off between inflation and unemployment affected when inflation expectations are anchored around the inflation target? Do well-anchored inflation expectations help to limit a fall in inflation when unemployment increases? Is there a risk that well-anchored inflation expectations together with inflation outcomes below the target will help to increase unemployment? Can the ECB help to reduce unemployment in the crisis countries of the euro area by temporarily increasing inflation in the entire euro area?
Maria Sandström, David Forsman, Johanna Stenkula von Rosen and Johanna Fager Wettergren describe the market for covered bonds and identify the potential risks this market may pose to financial stability. They describe why covered bonds have a high credit rating and their major importance to the funding of the Swedish banks. The risks are mainly due to the maturity mismatch between covered bonds, which have relatively short maturities, and the more long-term mortgages that they fund. This adds to refunding risks in connection with a financial crisis as market efficiency may be undermined.
Elias Bengtsson, Ulf Holmberg and Kristian Jönsson describe new methods for measuring systemic risk in the financial system and what they say about developments at the major Swedish banks. The systemic importance of the four major banks increased ahead of the financial crisis, which led to increased risks when the full force of the crisis hit in 2008- 2009 and when the European debt crisis intensified in 2011. Thereafter the measures indicate declining risks in the Swedish financial system. However, the ranking of how systemically-important the four major banks are is affected by which measure is used. It is therefore important to use several different measures when assessing risks in individual banks and the financial system as a whole.
