NuovaEra2012
Nuovo Utente
- Registrato
- 28/7/11
- Messaggi
- 6.168
- Punti reazioni
- 228
FXstreet.com (Barcelona) - The Goldman Sachs economics team believe that the sharp contraction of financial imbalances in 2008/2009 has had a much larger impact on macroeconomic performance than the equity market correction of 2000/2001. They note that the more recent crisis has shown that sharp credit and house price corrections can have significant and non-linear effects on economic activity.
Whilst the impact of the sharp correction of pre-crisis financial imbalances has had a prolonged effect on most advanced economies, recoveries have nonetheless differed widely. They highlight Scandinavia as an example: Sweden and Norway have recovered strongly, while the Danish economy remains in a depressed state.
The team believe that the situation in Scandanavia supports the case for central banks to ´lean against the wind´. They write, “The sharp and persistent effects of the financial crisis on macroeconomic performance have clearly strengthened the case for policy makers to contain embryonic financial imbalances. This supports the case for extensive use of macro-prudential tools. But with the severity of the crisis in mind and uncertainties remaining about the design and effectiveness of macro-prudential tools, it seems advisable also to employ monetary policy as an instrument to address future financial imbalances.”
In that sense, Scandanavia can offer early lessons for the rest of Europe. Sweden and Norway have almost fully recovered from the financial crisis but concerns over financial imbalances have re-emerged. Both the Riksbank and Norges Bank raised rates in 2010, but weak external momentum and concerns about exchange rate appreciation have lead to an easing of monetary policy in the region over the past year.
While further near term easing may occur, especially in Sweden, the team believe that concerns that keeping policy rates ´too low for too long´will fuel financial imbalances are likely to imply that, over the medium term, monetary policy in Scandanavia will be less accommodative than currently priced in by the market. In parallel, given these concerns, they expect central banks to contain the imbalances via both macro-prudential tools and the interest rate instrument.
Whilst the impact of the sharp correction of pre-crisis financial imbalances has had a prolonged effect on most advanced economies, recoveries have nonetheless differed widely. They highlight Scandinavia as an example: Sweden and Norway have recovered strongly, while the Danish economy remains in a depressed state.
The team believe that the situation in Scandanavia supports the case for central banks to ´lean against the wind´. They write, “The sharp and persistent effects of the financial crisis on macroeconomic performance have clearly strengthened the case for policy makers to contain embryonic financial imbalances. This supports the case for extensive use of macro-prudential tools. But with the severity of the crisis in mind and uncertainties remaining about the design and effectiveness of macro-prudential tools, it seems advisable also to employ monetary policy as an instrument to address future financial imbalances.”
In that sense, Scandanavia can offer early lessons for the rest of Europe. Sweden and Norway have almost fully recovered from the financial crisis but concerns over financial imbalances have re-emerged. Both the Riksbank and Norges Bank raised rates in 2010, but weak external momentum and concerns about exchange rate appreciation have lead to an easing of monetary policy in the region over the past year.
While further near term easing may occur, especially in Sweden, the team believe that concerns that keeping policy rates ´too low for too long´will fuel financial imbalances are likely to imply that, over the medium term, monetary policy in Scandanavia will be less accommodative than currently priced in by the market. In parallel, given these concerns, they expect central banks to contain the imbalances via both macro-prudential tools and the interest rate instrument.
