New issue of the journal Sveriges Riksbank Economic Review

Date 20/11/2015

Why has inflation been so low?

Björn Andersson, Vesna Corbo and Mårten Löf analyse the reasons that inflation has been low in Sweden for a long time. They study the development of inflation in more detail and focus on a number of possible explanations. Using a general equilibrium model, they also show how these various explanatory factors may have interacted to keep inflation unusually low over the last five years. The results indicate that weak international economic activity and low commodity prices, particularly for energy, have played a large part. For a period, an appreciation of the krona contributed towards the low inflation. In addition, over the two last years, companies' margins have been lower than normal, particularly as a result of increased competition and uncertainty over the future.

The Swedish payment market in transformation

Björn Segendorf and Anna-Lena Wretman analyse the structural transformation of the Swedish payment market. They note that payments are increasingly being made electronically and that cash usage is decreasing. The Internet, tablets and smart phones are changing households' purchasing patterns and payment requirements. The banks are also facing competition from new actors. Even if these developments are positive overall, some households, associations and companies perceive them as negative as they create problems for them. Tools for solving, or mitigating, these problems exist but the authors consider that what is needed is cooperation between the market participants and between the market and the government. The government's tasks include ensuring that there is a safety net for those users who risk finding themselves outside the payment market.

How can monetary policy take account of uncertainty and risk?

Jan Alsterlind describes how monetary policy can more clearly take uncertainty and risks into account. His starting point is that a central bank cannot be certain which description of the economy is correct. This uncertainty may surround which economic relationships and/or which forecast models are appropriate to use when monetary policy decisions must be made. One possibility is to use several forecast models and weigh their respective forecasts together. This will make it possible for monetary policy to be characterised by consideration of risks, which are then defined and quantified. This would also make it easier to monitor and evaluate the account that the central bank has taken of risks and uncertainty in decision making.