The monetary policy of Sweden is decided by

Sveriges Riksbank Sveriges Riksbank, or simply the ''Riksbank'', is the central bank of Sweden. It is the world's oldest central bank and the fourth oldest bank in operation. Etymology The first part of the word ''riksbank'', ''riks'', stems from the Swedish w ...

, the central bank of Sweden. The

monetary policy Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money supply, often a ...

is instrumental in determining how the Swedish

currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general ...

is valued.

History

The main events in the monetary history of the '' Krona'' are: *Introduction of the Krona, based on the

gold standard A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from the l ...

on 5 May 1873. (1 kg of gold = 2480 Kronor) *The tie to gold is abolished on 2 August 1914. *The tie to gold is ''de facto'' re-established in November 1922. *The tie to gold is ''de jure'' re-established on 1 April 1924 *The tie to gold is abolished once more on 27 September 1931. Floating exchange rate. *A tie to the

British pound Sterling (abbreviation: stg; Other spelling styles, such as STG and Stg, are also seen. ISO code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound ( sign: £) is the main unit of sterling, an ...

is introduced in June 1933. (1 GBP = 19.40 SEK) *Tied to the

US dollar The United States dollar ( symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the officia ...

on 28 August 1939. (1 USD = 4.20 SEK) *A controlled appreciation of 14.3%, against all other currencies and gold on 13 July 1946. (1 USD = 3.60 SEK) *A controlled depreciation of 30.5% against the USD on 19 September 1949. (1 USD = 5.17 SEK) *Membership of the

International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...

and part of the Bretton Woods system on 31 August 1951. *A controlled depreciation of 1.0% against gold and a 7.5% appreciation against the USD on 21 December 1971. *A controlled depreciation of 5.0% against gold and a 5.6% appreciation against the USD on 16 February 1973. *Membership in the

Europe Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered a subcontinent of Eurasia and it is located entirel ...

an " currency snake" in March 1973. *Adjustment of the exchange rates within the "snake"; a controlled 3% depreciation against the

DEM DEM was the ISO 4217 currency code for the Deutsche Mark, former currency of Germany Computing * Digital elevation model, a digital representation of ground-surface topography or terrain ** .dem, a common extension for USGS DEM files * Discret ...

on 18 October 1976. *Adjustment of the exchange rates within the "snake"; a controlled 6% depreciation against the DEM on 4 April 1977. *Sweden leaves the "snake". A controlled 10% depreciation against a trade based "

currency basket A currency basket is a portfolio of selected currencies with different weightings. A currency basket is commonly used by investors to minimize the risk of currency fluctuations and also governments when setting the market value of a country’s ...

" on 29 August 1977. *A controlled depreciation of 10% against the "currency basket" on 14 September 1981. *A controlled depreciation of 16% against the "currency basket" on 8 October 1982. *A tie to the

European Currency Unit The European Currency Unit (, ; , ECU, or XEU) was a unit of account used by the European Economic Community and composed of a basket of member country currencies. The ECU came in to operation on 13 March 1979 and was assigned the ISO 42 ...

is introduced unilaterally on 17 May 1991. (1 ECU = 7.40 SEK) *Floating exchange rate on 19 November 1992. *A Swedish euro referendum is held on 2003, with 55.9 percent vote against membership of the eurozone.

1992

In late 1992 (Monday 14 September) the

began a steep decline that made it "leave" the

Exchange Rate Mechanism The European Exchange Rate Mechanism (ERM II) is a system introduced by the European Economic Community on 1 January 1999 alongside the introduction of a single currency, the euro (replacing ERM 1 and the euro's predecessor, the ECU) as p ...

on the Wednesday of that week. At the same time the Swedish currency began to decline; the first reaction from the central bank was to try to keep the current fixed exchange rates in place, and they set a target for their equivalent to the

federal funds rate In the United States, the federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight on an uncollateralized basis. Reserve balances a ...

marginal rate A marginal value is #a value that holds true given particular constraints, #the ''change'' in a value associated with a specific change in some independent variable, whether it be of that variable or of a dependent variable, or # hen underlying valu ...

") at 500%. The bank began to sell short-term government securities in large amounts but soon realized that market forces were strong, so they lowered their target rate, and let everyone sell what they wanted to sell, and the country saw a large selling of SEK, and SEK denominated papers. Between September 1992 and February 1993 the Swedish currency "TCW" index went from 125 to 100 (20% fall), while the British currency XBP index fell from 200 to 142 (29% fall).

References

* Jonung, Lars
Från guldmyntfot till inflationsmål
Sveriges_RiksbankLiabilities_as_a_percentage_of_GDP_1970–2007
{{Authority_control Monetary_policy_by_country.html" ;"title="konomisk debatt #1, 2000

External links

Sveriges RiksbankLiabilities as a percentage of GDP 1970–2007
{{Authority control Swedan Economic_history_of_Sweden.html" ;"title="Monetary policy by country">Swedan Economic history of Sweden">Monetary policy by country">Swedan Economic history of Sweden Public finance of Sweden

History

1992

See also

References

External links