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Open mouth operations: Monetary policy by threats and arguments : The monthly meetings between the Riksbank and the commercial banks, 1956-1973

Jonung, Lars LU (2023) In Penning- och Valutapolitik 2023(1). p.36-87
Abstract
After World War II and prior to the financial deregulation of the 1980s,
monetary policy in Sweden as well as in other western European
countries rested chiefly on a system of far-reaching non-market-oriented
controls of credit flows and interest rates. How was monetary policy
conducted in such an environment of financial repression, where the
central bank was unable to rely on traditional monetary policy
instruments working on "free" and "unregulated" money and capital
markets? This study provides an answer from the Swedish experience. It
is based on a unique set of confidential minutes from about 160 monthly
meetings between the Riksbank and the commercial banks during the
years... (More)
After World War II and prior to the financial deregulation of the 1980s,
monetary policy in Sweden as well as in other western European
countries rested chiefly on a system of far-reaching non-market-oriented
controls of credit flows and interest rates. How was monetary policy
conducted in such an environment of financial repression, where the
central bank was unable to rely on traditional monetary policy
instruments working on "free" and "unregulated" money and capital
markets? This study provides an answer from the Swedish experience. It
is based on a unique set of confidential minutes from about 160 monthly
meetings between the Riksbank and the commercial banks during the
years 1956-73.

The examination of the minutes demonstrates that monetary policy was
framed in a process involving threats and arguments in a small and
closed club involving the central bank and the chief executives of the
commercial banks. According to a joke assigned to Erik Lundberg, “open
market operations were replaced by open mouth operations” – albeit the
dialogue was kept within the club. When Swedish financial markets were
deregulated in the 1980s, the standard tools of monetary policy rapidly
replaced the meetings between the central bank and the commercial
banks. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
in
Penning- och Valutapolitik
volume
2023
issue
1
pages
36 - 87
publisher
Sveriges Riksbank
ISSN
2000-978X
language
English
LU publication?
yes
id
26b3c921-49e8-48d6-ad6b-3d7cecc82295
alternative location
https://www.riksbank.se/sv/press-och-publicerat/publikationer/penning--och-valutapolitik/
date added to LUP
2023-05-22 12:46:13
date last changed
2023-05-22 12:46:13
@article{26b3c921-49e8-48d6-ad6b-3d7cecc82295,
  abstract     = {{After World War II and prior to the financial deregulation of the 1980s,<br/>monetary policy in Sweden as well as in other western European<br/>countries rested chiefly on a system of far-reaching non-market-oriented<br/>controls of credit flows and interest rates. How was monetary policy<br/>conducted in such an environment of financial repression, where the<br/>central bank was unable to rely on traditional monetary policy<br/>instruments working on "free" and "unregulated" money and capital<br/>markets? This study provides an answer from the Swedish experience. It<br/>is based on a unique set of confidential minutes from about 160 monthly<br/>meetings between the Riksbank and the commercial banks during the<br/>years 1956-73.<br/><br/>The examination of the minutes demonstrates that monetary policy was<br/>framed in a process involving threats and arguments in a small and<br/>closed club involving the central bank and the chief executives of the<br/>commercial banks. According to a joke assigned to Erik Lundberg, “open<br/>market operations were replaced by open mouth operations” – albeit the<br/>dialogue was kept within the club. When Swedish financial markets were<br/>deregulated in the 1980s, the standard tools of monetary policy rapidly<br/>replaced the meetings between the central bank and the commercial<br/>banks.}},
  author       = {{Jonung, Lars}},
  issn         = {{2000-978X}},
  language     = {{eng}},
  month        = {{05}},
  number       = {{1}},
  pages        = {{36--87}},
  publisher    = {{Sveriges Riksbank}},
  series       = {{Penning- och Valutapolitik}},
  title        = {{Open mouth operations: Monetary policy by threats and arguments : The monthly meetings between the Riksbank and the commercial banks, 1956-1973}},
  url          = {{https://www.riksbank.se/sv/press-och-publicerat/publikationer/penning--och-valutapolitik/}},
  volume       = {{2023}},
  year         = {{2023}},
}