granscole


logo


How the American Federal Reserve saved Sweden from the financial crisis but Sweden took credit boasted efficient management.


 




Tuesday, 30 August 2011
Today Swedish Minister of Finance, Anders Borg and the Swedish central bank are seen in the international financial community as stars for making Sweden standing out of the crisis of 2008 – 2009 and for properly managing the crisis that ensured. But new revelations points to the American Federal reserve as the saviour of Sweden.

Based on the Parliamentary Finance Committee report released today, "An Evaluation of the Riksbank's monetary policy and work on financial stability 2005-2010" by Professors Charles Goodhart, Jean-Charles Rochet, Professor Charles Goodhart do not think that Swedish people are aware of how close it was that Sweden was about to go under during the financial crisis in 2008 – 2009.

The Swedish banks were tied up in large dollar loans that were lay too exposed to the galloping risks in the Baltics. With the collapse of the financial systems during the heat of the crisis, it was difficult to access the U.S. dollars and the Swedish Riksbank did not have enough to help banks.

Then the European Central Bank and especially the American Federal Reserve (Fed) came up with an exchange agreement with the Swedish Riksbank.

"If it had not been for the Fed, Sweden would have been in much bigger problem, "said Goodhart.
Researcher, Professors Charles Goodhart at the London School of Economics and Jean-Charles Rochet at Toulouse School of Economics and Institute for Banking and Finance at the University of Zurich, have also taken on the Riksbank's governing executive board that the  six executives there directors have been very fragmented.

Advertisement

The has to do with a non unilateral decision on the Swedish interest rate regimes supported by the banks executives Throughout the spring, four members voted for increases in interest rates, while two have a reservation.

"The majority have expressed some concern over house prices and household indebtedness, while minority focused solely on the optimal development path for inflation and GDP, "the researchers write.

They note also that there is scientific support for both positions and the two researchers would not provide a side full support.

The damaging effects during the financial crisis 2007-2008 were relatively mild in Sweden.
"This was partly because the Riksbank acted quickly and efficiently, "the researchers write.
This positive result was achieved despite a "relatively poor institutional and legal structure."
As such it could be said that Sweden was just lucky to have wedded the crisis better and not just because of some skilful leadership or impressive strategy.

"The evaluation is a very good initiative and an important contribution to the parliamentary scrutiny of our work. Openness is part of efforts to build confidence in our data. We therefore welcome the investigation; this time which also includes financial stability.
Also, the evaluation is an important contribution to the development of our internal analysis. Now we will closely read the report and go through the proposals that the two professors propose, ” says Governor of the Swedish central bank,  Stefan Ingves.
By Scancomark.se Team


Print this article

What do you think about this article? Would you like to leave a comment? It will be much appreciated. You can also rate this article.

  • Should be Empty:






















































































































logo
Scandinavian Companies & Market Magazine
(C) 2010  Granscole Establishment Sweden AB. Registered in Sweden as a Media Company. Organisation Number: 556782-6572
F-Skatt (VAT) Number: SE556782657201