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Monetary Policy and Leading Indicators of Inflation in Sweden
This paper derives a set of leading indicators of inflation for Sweden. It also discusses methodological and policy issues pertaining to the estimation of these indicators. The main findings are: (1) narrow money is the most powerful leading inflation indicator; (2) broad money and inflation expectations have significant predictive information on inflation; (3) the output gap, interest rates, and the credit aggregate have some predictive information on inflation, and this information is confined to a shorter time horizon than either the monetary aggregates or inflation expectations; and (4) implied forward rates have only weak predictive information on inflation.
The Structural Crisis in the Swedish Economy
This paper focuses on the main institutional features of the Swedish labor market and analyzes the reasons for the high wage inflation and slow productivity growth. The so-called Swedish model, usually identified with an advanced welfare state, has attracted attention from many quarters for its apparent earlier success. One of the distinctive features of the Swedish model has been its unique labor market institution, which combines centralized bargaining with a policy of wage equalization, designed with a view to promoting a favorable macroeconomic performance. The concept of solidaristic wages was initially conceived as equal pay for equal work. Estimates provided by the Swedish Ministry of Finance, indicate that the wage spread for industrial workers, calculated as the difference between the highest and lowest deciles in 1984, was 34 percent for Sweden in contrast to 210 percent for the United Kingdom and 490 percent for the United States.
Emerging Local Securities and Derivatives Markets
In response to the volatility of capital flows since the mid-1990s, many emerging market economies have taken a variety of steps designed to “selfinsure” against volatile capital flows. One such measure has been the development of local securities and derivatives markets as an alternative source of funding the public and corporate sectors. This paper examines this self-insurance policy, focusing on the extent to which emerging markets have developed local securities and derivatives, and what key policy issues have arisen as a result.
Recession and Recovery in the United Kingdom in the 1990'+L927s
This paper uses a vector autoregression (VAR) approach to identify the causes of the 1990-92 recession in the UK. The VAR approach is shown to be particularly pertinent for quantifying the relative magnitude of the different demand shocks, and in decomposing them into monetary and expectational factors. The main finding is that the recent recession was precipitated primarily by shocks to consumption, and that monetary factors explain just part of this contraction. The VAR model also offers interesting insights about the long duration of the recession and the nature of the recovery that is currently underway.
The Real Effects of Monetary Policy in the European Union
The main finding of this paper is that the European Union (EU) countries fall into two broad groups according to the effects of monetary policy adjustments on economic activity. Estimates based on a vector autoregression model indicate that the full effects of a contractionary monetary shock on output in one group of EU countries (Austria, Belgium, Finland, Germany, Netherlands, and United Kingdom) take roughly twice as long to occur, but are almost twice as deep as in the other group (Denmark, France, Italy, Portugal, Spain, and Sweden). The paper discusses the implications of these results for the effective conduct of monetary policy in the euro area.
Japan's Stagnant Nineties
This paper uses a vector autoregression (VAR) approach to identify the driving forces of the growth slowdown in Japan during the 1990s. Negative shocks to both residential and nonresidential investment are shown to have been important determinants of the slowdown. Despite the collapse in asset prices, negative shocks to private consumption were relatively small. A surprising conclusion is that trends in public consumption had a dampening impact on activity in the 1990s. The VAR estimations do not support the counterfactual conjecture that activity in Japan would have been significantly weaker in the absence of the expansionary shift in fiscal policy.
Challenges to the Swedish Welfare State
Sweden's economy in the early 1990s has been characterized by a deep recession, high unemployment, a ballooning public sector budgete deficit, and a decline in the value of the currency- developments that have raised questions about the country's capacity to sustain its comprehensive welfare state. This study provides an analysis of recent economic developments in a longer-term context and assesses their implications for future policies.
Shocks and Structural Breaks
This paper analyzes the effects of the labor market reforms launched in the early 1980s by the Conservative government led by Mrs. Thatcher. It is argued that the increase in the growth of labor productivity in manufacturing after 1980 as well as the improvement in the responsiveness of employment to variations in output can be largely attributed to the success of the reforms in reducing industrial disputes and removing a number of structural impediments in the labor market. However, the reforms did not succeed in moderating real wage growth or improving the tradeoff between wage inflation and unemployment. This is attributed to certain aspects of the wage bargaining system and the influence of relative wage norms in the process of wage determination.
Monetary Frameworks
This paper discusses how the size of the monetary union in Europe can influence the choice of the monetary framework. The main conjecture is that the European Central Bank ought to target inflation if monetary union is confined to a “core” group of countries. However, the decision on whether to target inflation or monetary aggregates is not an unambiguous one if monetary union is EU-wide; the choice of the framework will depend on the type of shocks that are likely to prevail. The arguments motivating these conjectures essentially concern the trade-offs between the viability and credibility of different monetary frameworks.
Growth, Trade, and Deindustrialization
This paper shows that deindustrialization is explained primarily by trends internal to the advanced economies. These include the combined effects on manufacturing employment of a relatively faster growth of productivity in manufacturing, the associated relative price changes, and shifts in the structure of demand between manufactures and services. North-South trade explains less than one fifth of deindustrialization in the advanced economies. Moreover, the contribution of North-South trade to deindustrialization has been mainly through its effects in stimulating labor productivity in Northern manufacturing. It has had little enduring effect on total manufacturing output in the advanced economies.
