New issue of the Riksbank’s journal Economic Review
News The first edition of Sveriges Riksbank Economic Review for 2021 contains four articles, which all cover subjects related to central bank core activities. The first article discusses why the krona weakened during the period from 2013 to the beginning of 2020. The second and third articles concern liquidity supply: how the Federal Reserve has contributed dollar liquidity to other central banks and how the Riksbank supported the economy during spring and summer 2020. The final article returns to the Riksbank’s purchases of government bonds in the period 2015 to 2017, and analyses how the purchases affected financial markets.
The articles in the first issue of the Riksbank’s journal Economic Review for 2021:
On the weakness of the Swedish krona
Philippe Bacchetta and Pauline Chikhani at the University of Lausanne have written an article, commissioned by the Riksbank, analysing the development of the Swedish krona over the past years. From 2013 to the beginning of 2020, the krona weakened continuously against many other currencies, an unexpected development for many, including the Riksbank. Bacchetta and Chikhani go through various explanatory variables, including factors from traditional macroeconomic models and factors that can be linked to the monetary policy conducted. They also discuss how financial frictions and shocks may have contributed to the development of the krona.
Dollar liquidity from the Federal Reserve to other central banks
Marushia Gislén, Ida Hansson and Ola Melander describe why the US central bank, the Federal Reserve, has supplied other central banks with liquidity in US dollars, and how this is done in practice. The Riksbank is one of the central banks that has entered into a swap agreement with the Federal Reserve. The authors provide a brief history of the Federal Reserve’s swap agreements from the 1960s and onwards, and also discuss how the swap agreements in 2020 contributed to alleviating unease on the dollar market as a result of the coronavirus pandemic.
Coronavirus pandemic: The Riksbank’s measures and financial developments during spring and summer 2020
Peter Gustafsson and Tommy von Brömsen describe the measures taken by the Riksbank in spring and summer 2020 to counteract the damaging effects of the pandemic on the Swedish economy. The authors describe the sequence of events on the financial markets during this period, with particular focus on the most acute phase of the crisis in March. They also describe how the banks’ lending to companies and households developed, as the purpose of the Riksbank’s measures was ultimately to support the supply of credit and prevent the pandemic developing into a financial crisis.
Effects on financial markets of the Riksbank’s government bond purchases 2015–2017
Ola Melander reviews the Riksbank’s earlier purchases of government bonds during the period from February 2015 to April 2017. He discusses how such purchases can affect the economy according to economic theory, and analyses how the purchases affected prices on financial markets, that is to say the first stage in the monetary policy transmission to the broader economy. The study is partly based on earlier analysis at the Riksbank, but also contains new results and conclusions regarding the effects on inflation expectations and real interest rates.