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How well can a simple monetary model explain the depreciation of the Swedish Krona
University West, Department of Economics and IT, Divison of Law, Economics, Statistics and Politics.
2015 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

This paper examines the reasons for the fluctuations in the Swedish exchange rate for the period 2005 to 2014. Mainly, focus will be on the nominal bilateral exchange rate measured against the dollar. Although, as an attempt to extend the model and get a better result, the effective Swedish exchange rate, measured as the total competitive weight-index, will also be tested. A simple monetary model, of the Mundell-Fleming approach, and a vector error correction model is used to find the factors of the depreciation, specifically, during the last six months. The result found in the study is that the theory explains what has actually happened in the economy well, and is valid when trying to explain the volatility of the exchange rate. A decrease in the interest rate causes a depreciation in the exchange rate to a great extent, together with an increase in inflation and a decrease in national income.

Abstract [sv]

Denna studie undersöker svängningarna i den svenska växelkursen under perioden 2005 till 2014. Fokus kommer främst att ligga på den nominella bilaterala växelkursen då den svenska kronan mäts mot dollarn. Den effektiva svenska växelkursen, beräknat som den totala konkurrensvikten (TCW-index), kommer också att testas som ett försök att utvidga modellen och få ett bättre resultat. En enkel monetär modell, vilken är en reviderad Mundell - Fleming modell, och "vector error correction model" används för att få fram orsakerna till deprecieringen med fokus på de sista sex månaderna. Studiens resultat är att teorin förklarar vad som egentligen har hänt i ekonomin på ett lämpligt sätt. Sänkningen av reporäntan kan till stor del förklara volatiliteten och försvagningen i den svenska växelkursen, tillsammans med lägre BNP och en ökning av inflationen.

Place, publisher, year, edition, pages
2015. , 33 p.
Keyword [en]
Exchange rate, volatility, expansionary monetary policy, Mundell-Fleming model
National Category
Economics
Identifiers
URN: urn:nbn:se:hv:diva-8165Local ID: NAX500OAI: oai:DiVA.org:hv-8165DiVA: diva2:855038
Subject / course
Nationalekonomi
Educational program
Mäklarekonom
Supervisors
Examiners
Available from: 2015-09-25 Created: 2015-09-18 Last updated: 2015-09-25Bibliographically approved

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CiteExportLink to record
Permanent link

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Cite
Citation style
  • apa
  • ieee
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More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
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  • asciidoc
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