New issue of the journal Sveriges Riksbank Economic Review

The role of central banks in societal development – challenges in emerging economies

Stefan Ingves, Pernilla Meyersson and Cecilia Kahn write about central banks' overall tasks and activities, with a particular focus on central banks in emerging market economies. The article highlights some of the most important challenges faced by central banks in emerging economies and the role of the central bank as agent for development. The article also describes the Riksbank's cooperation with some other central banks in the form of technical assistance.

Is the Swedish neutral interest rate affected by international developments?

Sweden is a small open economy that is very much affected by international developments. In recent decades, global real interest rates have fallen and Hanna Armelius, Martin Solberger and Erik Spånberg study how this has affected interest rates in Sweden. They use a simple model to calculate a Swedish "neutral" interest rate and find that it has fallen in recent decades and that it is currently negative. They also find that the downturn is largely explained by falling neutral interest rates abroad, where the main impact comes from interest rates in the United States.

The case for flexible exchange rates after the Great Recession

Giancarlo Corsetti, Keith Kuester and Gernot Müller revisit a classical question in international macroeconomics – the choice between a fixed or a floating exchange rate. Following the financial crisis the case for fixed exchange rates gained ground again, partly with reference to their function as a nominal anchor during times of major macroeconomic shocks. The authors of this article argue that the question is just not that simple. They use theoretical arguments to show that a floating exchange rate protects small open economies from shocks originating abroad. They also argue that their conclusions are supported by developments in the Nordic countries following the financial crisis, when growth in both Norway and Sweden, which have floating exchange rates, recovered faster than growth in Denmark and Finland, which both have fixed exchange rates.

Financial frictions, financial regulation and their impact on the macroeconomy

In this survey article Daria Finocchiaro and Anna Grodecka write about the importance of having a good understanding of financial frictions – departures from the assumption of perfectly functioning financial markets – in analyses of economic developments. Prior to the financial crisis, it was common that macro models disregarded financial frictions. However, this has changed in recent years, and the article contains a review of the latest research on this subject. They also write about how different types of regulation can counteract the negative effects of financial frictions.