Monetary History and Central Banking in Sweden

1. Monetary History and Central Banking in Sweden Norges Bank’s bicentenary project, 1816 – 2016 Writing Central Bank and Monetary History – what are the issues? The Graduate Institute, Geneva. October 30 – 31 2008 Anders Ögren EHFF – Institute for Economic and Business History Stockholm School of Economics Histoire et Theorie Economique – EconomiX CNRS at Université de Paris X Nanterre Uppsala Center for Business History at Uppsala University

2. What is a Central Bank? • Currency Management • Issuer of Base Money • Bank of the state • Bankers’ bank • Provider of lender of last resort • (Supervisor of the banking/financial system). Writing Central Bank and Monetary History – what are the issues? The Graduate Institute, Geneva. October 30 – 31 2008

3. Central Bank Objectives • - Pre WW I To guarantee the stable value of the currency and to promote a steady supply of credit (after 1834 to adhere to the specie standard plus a steady supply of credit) • Fixed exchange rate and employment (or the other way around) • Price stability (but should also be employment, see for instance critic of the Riksbank from IMF) (Financial Times European edition November 29, 2006 p. 4) Writing Central Bank and Monetary History – what are the issues? The Graduate Institute, Geneva. October 30 – 31 2008

4. The classical Central Bank dilemma Liquidity/Credit vs. stable monetary value (growth vs. financial stability, efficiency vs. prudence) What factors determine the possibilities of influential monetary policy? And how? Writing Central Bank and Monetary History – what are the issues? The Graduate Institute, Geneva. October 30 – 31 2008

5. The Swedish banking system • The Riksbank (1668 – ) Bank of Parliament. Central bank? • National Debt Office (Riksgäldskontoret) State Debt • Discount Companies (1780s – 1818) • Enskilda banks (1831 – 1906) Private, unlimited liability, right to issue notes • Filial banks (1851 – 1864) Private, unlimited liability, operating with Riksbank credit and equity capital • Joint Stock banks (1864 – today) Limited liability banks, (no right to issue notes). Writing Central Bank and Monetary History – what are the issues? The Graduate Institute, Geneva. October 30 – 31 2008

6. Monetization – Notes in Circulation Total amount of circulating notes 1732-1913 in 1000’s SEK. Deflated with index for day-wage: 1732 = 1. Silver & Fiat ? Fiat Gold & SCU Silver Silver Fiat Sources: Jörberg (1972), p.710-714, Riksbanken (1931), p.9-10, p.13-17, p.40-51, Ögren, A. (2003) Writing Central Bank and Monetary History – what are the issues? The Graduate Institute, Geneva. October 30 – 31 2008

7. When did the Riksbank become a Central Bank? • Traditionally: When the right to issue notes of the private banks ended (1903) • Not possible to run influential monetary policy • A Commercial Bank • No Inter bank clearing • No lender of last resort • Not the Bank of the state • Not the Bankers’ bank Writing Central Bank and Monetary History – what are the issues? The Graduate Institute, Geneva. October 30 – 31 2008

8. When did the Riksbank become a Central Bank? • From the late 1850s to the early 1880s: • Factors influencing monetary policy • Politics – Democratization • Increased internationalization - Capital Imports • Development of the Financial System • Changing organization of the Bank • Changing banking legislation Writing Central Bank and Monetary History – what are the issues? The Graduate Institute, Geneva. October 30 – 31 2008

9. When did the Riksbank become a Central Bank? • Issuer of Base Money (Bank reserves) • (Autonomous) Monetary Policy (sterilization) • Funds of the National Debt Office • Facilitating the Financial System • Relative decrease in the direct involvement in the financial market • Clearing (Postal Bank Bills, Commercial banks deposits) • Lender of Last Resort (Discounting of bills, Bonds as collaterals) • Supervision Writing Central Bank and Monetary History – what are the issues? The Graduate Institute, Geneva. October 30 – 31 2008

10. Internationalization – Foreign Debt Cumulative Current Account Balances and Foreign Debt, 1834-1913. 1000's SEK Sources: Lindahl, E., Dahlgren, E. & Kock, K. (1937:1) pp. 268-269, Schön, L. (1999), Sveriges Riksbank (1931) pp. 54-71 Writing Central Bank and Monetary History – what are the issues? The Graduate Institute, Geneva. October 30 – 31 2008

11. The Financial Revolution and the Relative importance of the Riksbank Various financial measures in percent of GDP, 1840 – 1910 • Only the Skåne Hypoteksförening.Sources: Krantz, O. (2001), Nygren, I. SCB (1960), Schön, L. (2000), Sommarin, E. (1934), Sveriges Allmänna Hypoteksbank (1911), Sveriges Riksbank (1931), Ögren, A. (2003) Writing Central Bank and Monetary History – what are the issues? The Graduate Institute, Geneva. October 30 – 31 2008

12. Financial Revolution Figure 1: Broad Money Supply in Sweden, 1834 – 1913 (Per Capita and in Stable prices). Semi-logarithmic Scale Source: Ögren, A. (2003) Writing Central Bank and Monetary History – what are the issues? The Graduate Institute, Geneva. October 30 – 31 2008

13. Sources • Qualitative: • Minutes of the Boards (the Riksbank, the National Debt Office and Private banks) • Correspondence • Parliamentary prints • Legal Codes • Contracts • Quantitative: • Balance sheets (the Riksbank, the National Debt Office and Private banks) • Monetary Remittances • Macro data (GDP, Foreign Debt, Fiscal data, Exchange rates, Interest Rates, Prices) Writing Central Bank and Monetary History – what are the issues? The Graduate Institute, Geneva. October 30 – 31 2008