weak international public finances and swedish monetary policy deputy governor karolina ekholm
TRANSCRIPT
Weak international
public finances and Swedish
monetary policy
Deputy Governor Karolina Ekholm
Figure 1. Gross debt in advanced and emerging economies Per cent of GDP
30
40
50
60
70
80
90
100
110
120
130
92 94 96 98 00 02 04 06 08 10 12 14
30
40
50
60
70
80
90
100
110
120
130Advanced economiesMajor advanced economies (G7)
Emerging & Developing Economies
Source: IMFNote. Broken lines represent IMF’s forecast October 2010.
Figure 2. Fiscal policy and the economic cycle in the euro area 1992-2009
Source: IMF
An
nu
al ch
an
ge in
gen
era
l g
overn
men
t str
uctu
ral
bala
nce,
per
cen
tag
e p
oin
ts o
f G
DP
Output gap, per cent of potential GDP
Note. Regression refers to the years 1992-2007.
-3
-2
-1
0
1
2
3
-4 -3 -2 -1 0 1 2 3 4
Counter-cyclical fiscal policy:
Expansionary fiscal policy, weak economy
Counter-cyclical fiscal policy:
Tighter fiscal policy, strong economy
Pro-cyclical fiscal policy:Tighter fiscal policy, weak economy
Pro-cyclical fiscal policy:Expansionary fiscal policy, strong
economy
2008
2009
Figure 3. Debt increase in G7 countries 2008-2010
Source: IMF
Automatic stabilizers and other effects of lower growth
(72%)
Discretionary fiscal policy (16%)
Financial sector support (12%)
Figure 4. Austerity according to
the IMF Change in cyclically adjusted primary balance, per cent of GDP
0
2
4
6
8
10
12
14
Japa
nIre
land USA
Uni
ted
King
dom
Spain
Fran
ceNet
herla
nds
Portu
gal
Cana
daAu
stria
Belg
ium
Den
mark
Italy
Finl
and
Ger
man
ySw
eden
0
2
4
6
8
10
12
14
Source: IMFNote: Austerity refers to the improvement in the cyclically adjusted primary balance needed between 2010 and 2020 to reach a gross debt level of 60% (or stabilize debt at a lower level) until 2030. The scenario targets a net debt level of 80% for highly indebted Japan.
Figure 5. Comparison of recovery in Sweden, the euro area and USAGDP level, index 2007 quarter 4 = 100
92
94
96
98
100
102
104
106
108
110
07 08 09 10 11 12 13
92
94
96
98
100
102
104
106
108
110USA
Euro area
Sweden
Sources: Bureau of Economic Analysis, Eurostat, SCB, the RiksbankNote. The quarter prior to the recession breaking out in the USA = 100.
Figure 6. Swedish exports to different parts of the worldExports of goods 2009 Q3 - 2010 Q2, per cent
Source: Statistics Sweden
Euro area (37,6%)
Other European countries (34,7%)
Africa (3,3%)
Asia (11,8%)
South America (2,4%)
Rest of the world (1,5%)
North America (8,3%)
Lower demand from
companies and
households
Changes in asset prices, exchange rates etc
More expansionary
monetary policy in the troubled
country
EuropeHouseholds and
companiesCentral bank
Sweden Households and companies
The Riksbank
Figure 7. Spreading effects
Tighter fiscal policy
Figure 8. Monetary policy expectationsPer cent
0
1
2
3
4
09 10 11 12 13
0
1
2
3
4Forward rates Euro areaForward rates USAForward rates UKThe Riksbank's TCW-weighted policy forecastTCW-weighted forward rates based on market rates abroad
Note: Forward rates have been adjusted for risk premiums and describe the expected overnight rate. Sources: Reuters EcoWin and the Riksbank
Figure 9. Alternative repo rate paths, CPIF, CPI and unemployment in different alternativesForeign interest rates according to market listings
Sources: Statistics Sweden and the Riksbank
a. Repo ratePer cent
c. CPIFAnnual percentage change
d. UnemploymentPer cent
b. CPIAnnual percentage change
0
1
2
3
4
10 11 12 13
0
1
2
3
4
0
1
2
3
10 11 12 13
0
1
2
3
6
7
8
9
10 11 12 13
6
7
8
9
OutcomeMain scenario
Market rates abroad Lower policy rate with no initial increase
0
1
2
3
10 11 12 13
0
1
2
3