Lars Jonung

Improving Fiscal Policy in the EU: The Case for Independent Forecasts

We point out that official forecasts of output dynamics are crucial to the assessment of cyclically adjusted budget balances, and provide evidence that in some euro-area countries biased forecasts have played a thus far neglected role in generating excessive deficits. We suggest that the forecast bias may be politically motivated, and that forecasts produced by an independent authority would be better than in-house Ministry of Finance forecasts for the purpose of monitoring budget formation and budget outcomes.

Pioneering price level targeting: The Swedish experience 1931–1937☆

In September 1931, Sweden became the first country to make the stabilization of the domestic price level the official goal of its monetary policy, actually the only country that so far has adopted such an explicit price level target. Starting from the issues and concepts familiar from research and policy experience of inflation targeting - as contrasted to price level targeting - this paper examines the evolution of the Swedish price level targeting in the 1930s. We bring out a number of similarities and differences between price stabilization in the 1930s and in the 1990s.

The Future of Emu: What Does the History of Monetary Unions Tell Us?

A rotary piston engine with a plurality of sets of annular members forming cylinders and annular segment pistons moving inside the cylinders and provided with a hollow shaft and a core shaft extending coaxially therethrough and with a common shaft. A transmission is provided for connecting the central and core shafts to the common shaft whose axis is eccentric to the other two shafts. A central ring arrangement is provided which is connected by links to double-crank connectors mounted on the central and core shafts by links. The positions of the links may be varied to change the phase between the pistons and cylinders of the sets. The piston operates on the Stirling principle.

Knut wicksell's norm of price stabilization and Swedish monetary policy in the 1930's

This paper examines the conduct and the effects of Swedish monetary policy in the 1930s. Three major conclusions emerge from the study: (1) The conduct of monetary policy specifically the devaluation of the Swedish currency in 1931 and the subsequent program of price stabilization, had a major effect on the aggregative behavior of the Swedish economy in the 1930s. (2) The impact of the new fiscal policy was insignificant compared to the effects of monetary measures and international developments. (3) The framing of Swedish monetary policy in the 1930s was strongly influenced by Wicksells norm of price stabilization and the recommendations of the old generation of monetary economists represented by Gustav Cassel and Eli Heckscher.

The long-run behavior of velocity: The institutional approach revisited

In this paper we provide evidence using annual data for the period 1880 to 1986 that institutional variables are significant determinants of velocity in the United States, United Kingdom, Canada, Sweden and Norway. This evidence supplements our earlier findings (Bordo and Jonung, Cambridge University Press, 1987) for annual data ending in the early 1970s. We present eVidence that several proxies for institutional change in the financial sector are significant determinants of the long-run velocity function; that for the majority of countries the long-run velocity function incorporating institutional determinants has not undergone significant change over the last 10 to 15 years; and that out of sample forecasts over the last 10 to 15 years based on our institutional hypothesis are superior to those based on a benchmark long-run velocity function for a number of countries. these results suggests that failure to account for institutional change in the financial sector such as may be captured by our proxy variables may well be one factor behind the recently documented instability and decline in predictive power of short-run velocity models incorporating dynamic adjustment and higher frequency data.

The Effect of Unemployment, Inflation and Real Income Growth on Government Popularity in Sweden

This paper investigates empirically the effects of unemployment, inflation and real income growth on the popularity of the Swedish government by testing various vote functions for the period 1967–1978. Government popularity is measured on the basis of data obtained from monthly opinion polls. The results suggest that unemployment, in particular among workers in manufacturing industry, and inflation exerted a strong influence on the popularity of the Social Democratic Party, which was the ruling party during the period 1967–1976. The effects of real income growth are considerably smaller. The estimations are sensitive to the empirical specifications of the explanatory variables, although the basic conclusions remain unchanged.

The Great Financial Crisis in Finland and Sweden: The Dynamics of Boom, Bust and Recovery 1985–2000

This paper explores the anatomy of the boom, deep depression and recovery in the Finnish and Swedish economies in the period 1985-2000. These fifteen years are divided into three phases: (1) financial liberalization and the boom and the overheating of 1985-90, (2) the outbreak and spread of the crisis to all sectors of the economy in 1990-92, and (3) the recovery 1993-2000. Each period is analyzed separately.

The Rise and Fall of the Scandinavian Currency Union 1873-1920

As several European countries are now heading towards the establishment of a single European currency area, it becomes relevant to review the experience of past monetary unions. In this paper we examine the macroeconomic experience of Denmark, Norway and Sweden during the Scandinavian Currency Union (SCU) between 1873-1920. The union was gradually dissolved after the suspension of the gold standard at the outbreak of World War I in 1914. Two main questions face students of monetary unions: Why are they formed and why do they break apart? In this paper we shed some light on these questions. The paper is organized as follows. In section 2 we examine why the SCU was formed in the beginning of the 1870s. In section 3 money growth, prices, discount rates and real exchange rates in the three member countries are compared. In section 4 we discuss the dissolution of the SCU. Our main findings are summarized in section 5.

Should Finland and Sweden Form a Monetary Union

This paper surveys the future exchange rate policy of Finland and Sweden using the theory of optimal currency areas as a framework for the analysis. We examine which countries are most suitable to form a currency union with Finland and Sweden. The Finnish and Swedish economies display great similarities regarding industrial structure, business cycle patterns, migration and the design of economic policies. There are substantial differences between on the one hand Finland and Sweden, and on the other, many EU countries which are potential members of a future EMU. Our calculations give support for a Finnish-Swedish currency union and put a Finnish-Swedish membership of the EMU into question. Our results stress the importance of Finnish-Swedish co-operation in monetary matters. This could take many forms, of which a monetary union is one.

Inflation Targeting is a Success, so Far: 100 Years of Evidence from Swedish Wage Contracts

We evaluate the Swedish inflation targeting regime adopted in 1993−1995 using a novel approach based on a unique data set on the characteristics of collective wage agreements between 1908 and 2008. We find that the inflation targeting regime of 1995−2008 stands out as an exceptionally stable policy regime as judged by the willingness of wage contract-makers to repeatedly commit to three-year non-indexed wage agreements. Inflation targeting gained instant credibility in the sense that the labor market organizations entered long-term wage agreements at the same time as this new regime was announced. Inflation targeting has thus reduced macroeconomic uncertainty compared to previous regimes adopted in Sweden, including the gold standard before and after World War I, the price level targeting of the 1930s, the Bretton Woods period of fixed exchange rates. As judged by the reactions of the labor market participants, inflation targeting in Sweden is a success―at least so far.