Useful to question the view that the weakening of the krona is due to a gigantic misjudgment of the market
Locking the krone exchange rate against, for example, the euro; then, however, you give up the opportunity to decide the interest rate yourself in Sweden, and to set it according to the Swedish economy. A floating krona is also a shock absorber that helps keep the economy in balance.
It may be useful to question the view that the weakening of the krona is due to a gigantic misjudgment of the market, and not to actual fundamentals.
It is difficult to argue that the market is unable to price an asset that trades more than 15 times as much as all Swedish shares combined.
Important to remember is that there are actually possible real economic explanations for the krona changing,
The private bond market consists largely of property-related bonds that are not risk-free.
During the 2010s, Sweden had the world's lowest policy rate.
The government's surplus target may also have contributed to increasing Swedish national savings abroad.
If the weakening of the krona really has real economic foundations, then locking the exchange rate against the euro could be unfortunate.
Then instead, domestic prices and wages would have to change to create balance in the economy, and these variables move much more slowly than a currency does.
Torfinn Harding, professor of economics, University of Stavanger
Anders Åkerman, professor of economics, University of Stavanger
DN Debate 27 October 2024
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