New issue of the journal Sveriges Riksbank Economic Review
Date
18/09/2014
Following the global financial crisis, intensive work is under way on many fronts in several central banks. This involves contributing to stricter regulations for the financial system and clarifying the objectives of the central banks and how monetary policy is affected by new macroprudential policy tools. There is also a need for a more in-depth analysis of how the functioning of the economy may have changed since the crisis. The central banks also monitor technological developments with regard to new means of payment and analyse their effects on financial stability and on the monetary policy transmission mechanism. This issue of the Riksbank's journal contains four articles related to these issues.
Roberto Billi and Anders Vredin analyse whether a financial stability objective should affect central banks' monetary policy. Using many concrete examples from Sweden and other countries, as well as economic theory, they show that monetary policy and financial stability are closely related to one another, particularly in connection with financial crises. They therefore argue that financial stability should be an objective for monetary policy. This applies regardless of whether the central bank has the responsibility for financial stability (as in the United Kingdom), or whether this responsibility is shared with other public authorities (as in Sweden). The central banks need to continue to develop tools to estimate how an objective for financial stability and decisions on macroprudential policy measures should be taken into account in monetary policy.
Elin Eliasson, Emil Jansson and Thomas Jansson analyse the so-called bail-in tool, which is a central part of the Bank Recovery and Resolution Directive adopted by the EU in the spring of 2014. This Directive contains regulations regarding plans and tools to manage banks in various stages of financial problems. The bail-in tool gives the authorities the right to, in combination with other measures, write down a bank's liabilities, or to convert the liabilities to share capital to recapitalise the bank. The article analyses the bail-in tool from a Swedish perspective. The authors examine how the introduction of such a tool might affect the major Swedish banks' funding costs, debt structure and investor base. They have also studied possible contagion effects, both direct and indirect, of actually using the tool on one of the major Swedish banks. The introduction of the tool is expected to lead to somewhat higher total funding costs for Swedish banks. The direct contagion effects, at least to other banks, of using the bail-in tool should be limited, while the indirect effects could be greater in Sweden than in other countries, as the Swedish banks are so closely interconnected and heavily dependent on market funding.
Christina Håkanson analyses the matching between job vacancies and jobseekers on the Swedish labour market in the wake of the financial crisis. Earlier, both the Riksbank's and the National Institute of Economic Research's analyses showed that matching on the labour market had deteriorated since the crisis. Ms Håkanson follows up these analyses using different methods and data sources and shows that the matching problems remain with regard to employees and employers, particularly when statistics from Arbetsförmedlingen (the Swedish Public Employment Service) are analysed. One important reason is that the composition of the unemployed group has changed. The percentage of people with a weaker attachment to the labour market has increased – this includes larger shares of younger and older people and people born abroad. Although the picture of how difficult the matching problems are is affected by the data source used, the conclusion in the article is that the part of unemployment due to poorer matching probably cannot be reduced by means of more expansionary monetary policy.
Björn Segendorf analyses the virtual currency Bitcoin, which was created to enable anonymous payments made independent of governments and banks. The article describes how the transactions are verified and implemented by a decentralised network of users. The advantages for the users are anonymity/integrity and flexibility. There are also incentives to invest in new hardware resources as the most successful participants receive new Bitcoins. The disadvantage is that Bitcoin is not covered by consumer protection and is not under public supervision. There are also confidence problems of a technical nature for Bitcoin to be able to grow as a means of payment. Use of Bitcoin is therefore still limited – both in Sweden and abroad. The article concludes with a more general discussion of the future for virtual currencies.
