ECB and Riksbank quantitative easing effect on the Swedish economy

University essay from Lunds universitet/Nationalekonomiska institutionen

Abstract: The unconventional monetary policy has become standard practice by major central banks as a response to the global recession. However, the practice has continuously been used by central bank amongst the developed economy. The ECB and Riksbank make use of the practice; the belief is that the Riksbank make uses of the practice to stay competitive contra the Eurozone. Thus, this paper ought to analyze how the ECB and Riksbank monetary policy effects on the Swedish economy. The effects are simulated and analyzed in different channels with the use of impulse response functions. The method for the analysis is the use of a Bayesian VAR model, where the impulse response function simulates the response of the different channels to ECB and Riksbank monetary policy shocks. The results reveal that the Swedish economy response is greater to ECB monetary policy shocks contra the Riksbank. Which supports the notation of center country and periphery country relationship, where in this case the center central bank (ECB) is the most influential entity.

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