Lars Jonung

Professor emeritus

Swedish Central Bank Policy in the Post-War Period: Some Comments

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Lars Jonung

Summary, in Swedish

Swedish Central Bank Policy in the Post-War Period: Some Comments

This article discusses the nature of the actions taken by the Swedish central bank - the Riksbank - in the post-war period and examines some of the consequences of these measures. In this context the views of the critics of the Riksbank are presented. Further, a review of the Riksbank’s measures is given. A distinction between monetary policy and credit policy underlies the discussion. Monetary policy refers to traditional central bank actions designed to affect various monetary aggregates (the monetary base, commercial banks’ reserves and the money supply). Credit policy, on the other hand, signifies measures taken to influence the level of interest rates and the allocation of credit among different sectors of the economy. Generally, credit policy is associated with the use of administrative procedures aimed at controlling flows of credit. The main contention of this article is that the Riksbank’s policy can be characterized as credit policy rather than monetary policy, as the Riksbank has chosen to direct its actions primarily towards influencing the allocation of credit and towards regulating the composition of the assets of commercial banks. Further, the private sector has had to carry the major burden of adjustment to the Riksbank’s policy. Factors which may explain why the Riksbank has relied on credit controls are discussed. Specifically, the implications of the attempts to maintain a “]ow” level of interest rates are emphasized. Further, the influence on the Riksbank from Keynesian views on central banking, the theory of credit availability and from Swedish monetary doctrine are stressed. A review of the credit controls used is given. These encompass liquidity ratios, lending ceilings, quantitative limits on commercial bank borrowing from the Rıksbank, moral suasion, bond queue, foreign exchange control. Further, some statistics on the development of credit and monetary aggregates is presented. After this, the criticism of the Riksbank’s policy is presented. The equity and the efficiency of the Riksbank’s measures have been questioned. It has been pointed out that the credit policy will in the long run be less efficient as new channels of credit distribution will develope. Finally, it is suggested that a shift from the present credit policy to a traditional monetary policy would improve the Riksbank’s ability to carry out a successful stabilization policy.

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