The Riksbank's government bond purchases - how do they work?
Date
16/10/2015
The Riksbank's government bond purchases have supplemented the past year's interest rate cuts and made monetary policy even more expansionary. But how do these purchases work? How do they make monetary policy more expansionary? And what effects have the purchases had so far? The Riksbank's bond purchases are analysed in both theory and practice in two economic commentaries.
The commentary "How can government bond purchases make monetary policy more expansionary?" (PDF) describes how, according to economic theory, government bond purchases can be expected to influence market rates and other financial prices. It looks at effects which occur via the signalling, premium, portfolio and liquidity channels.
"Effects of the Riksbank's government bond purchases on financial prices" (PDF) analyses the effect the purchases have had on yield rates, exchange rates and asset prices. The assessment is that the Riksbank's purchases have contributed to:
Swedish yield rates being lower than they otherwise would have been the yield differential declining in relation to the rest of the world the krona becoming weaker than it otherwise would have been.
