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An Empty Suit: An Analysis of the Swedish Riksbank in an Integrated Economy

Selimovic, Theodor LU (2024) NEKH01 20232
Department of Economics
Abstract
The 2010s have raised questions about the influence of small central banks in an integrated economy. This thesis investigates the efficacy of the Swedish Riksbank and the effect of economic integration since the adoption of a floating exchange rate in 1993. Theoretically, I examine how financial integration and trade may impact the Mundell-Fleming trilemma. To investigate the impact of integration, and the efficacy of the Riksbank, two VARs are modelled. The first includes control variables for the Eurozone and US economies, the second does not. The difference between the models is the effect of economic integration as a confounding variable. The first model shows the efficacy of the Riksbank’s monetary policy. I find that the Riksbank has... (More)
The 2010s have raised questions about the influence of small central banks in an integrated economy. This thesis investigates the efficacy of the Swedish Riksbank and the effect of economic integration since the adoption of a floating exchange rate in 1993. Theoretically, I examine how financial integration and trade may impact the Mundell-Fleming trilemma. To investigate the impact of integration, and the efficacy of the Riksbank, two VARs are modelled. The first includes control variables for the Eurozone and US economies, the second does not. The difference between the models is the effect of economic integration as a confounding variable. The first model shows the efficacy of the Riksbank’s monetary policy. I find that the Riksbank has only weak efficacy, not able to significantly affect other variables when control variables are introduced. The effect of integration is shown to be large, with most variables being statistically insignificant. Both results concur with the general literature. (Less)
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author
Selimovic, Theodor LU
supervisor
organization
course
NEKH01 20232
year
type
M2 - Bachelor Degree
subject
keywords
Monetary Policy, The Riksbank, Vector Auto-Regression, Trilemma, Economic Integration.
language
English
id
9145240
date added to LUP
2024-04-16 09:24:30
date last changed
2024-04-16 09:24:30
@misc{9145240,
  abstract     = {{The 2010s have raised questions about the influence of small central banks in an integrated economy. This thesis investigates the efficacy of the Swedish Riksbank and the effect of economic integration since the adoption of a floating exchange rate in 1993. Theoretically, I examine how financial integration and trade may impact the Mundell-Fleming trilemma. To investigate the impact of integration, and the efficacy of the Riksbank, two VARs are modelled. The first includes control variables for the Eurozone and US economies, the second does not. The difference between the models is the effect of economic integration as a confounding variable. The first model shows the efficacy of the Riksbank’s monetary policy. I find that the Riksbank has only weak efficacy, not able to significantly affect other variables when control variables are introduced. The effect of integration is shown to be large, with most variables being statistically insignificant. Both results concur with the general literature.}},
  author       = {{Selimovic, Theodor}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{An Empty Suit: An Analysis of the Swedish Riksbank in an Integrated Economy}},
  year         = {{2024}},
}