Per Åsberg Sommar on the State of the Riksbank and Operating Systems Around the World - Macro Musings with David Beckworth Recap

Podcast: Macro Musings with David Beckworth

Published: 2026-01-05

Duration: 59 min

Summary

In this episode, David Beckworth engages with Per Åsberg Sommar from the Riksbank to discuss the history and current state of the Swedish central bank, focusing on its unique operating systems and their implications for modern monetary policy. They explore the evolution of the Riksbank, its historical significance, and the potential for adopting new frameworks like nominal GDP targeting.

What Happened

David Beckworth kicks off the episode by introducing Per Åsberg Sommar, a senior advisor in the markets department at the Riksbank, who shares insights into the Riksbank's operating framework and its historical context. The discussion comes after Beckworth's conversations with colleagues about the Riksbank's recent deposit facility, which requires banks to hold deposits at 0% interest to build capital reserves. This leads to a deeper examination of whether such measures are solely for capital buildup or also aimed at addressing the currency franchise's challenges.

Per provides a fascinating overview of the Riksbank’s history, noting that it is the oldest central bank in operation, established in 1668. He recounts how the Riksbank evolved from its predecessor, Stockholm Banko, which faced a run on the bank due to concerns over the stability of its notes. The Riksbank’s initial prohibition on issuing notes reflects lessons learned from this crisis. Beckworth highlights the significance of the Riksbank’s historical data, which is invaluable for researchers exploring macroeconomic theories, particularly regarding the long-run neutrality of money.

The conversation also touches on the Riksbank's historical role in monetary policy, including its adoption of price-level targeting from 1931 to 1937. Per explains how the Riksbank pegged the Swedish krona to major currencies during this period, showcasing its proactive approach to economic stability. Beckworth suggests that the Riksbank could consider nominal GDP targeting, which could influence broader practices among global central banks. They conclude by discussing the Riksbank's formal adoption of inflation targeting in 1995, marking another significant shift in its monetary policy approach.

Key Insights

• The Riksbank is the oldest central bank, established in 1668.
• The bank's historical data is a rich resource for macroeconomic research.
• The Riksbank has a history of innovative monetary policies, including price-level targeting.
• There is potential for the Riksbank to explore nominal GDP targeting in the future.

Key Questions Answered

What is the historical significance of the Riksbank?

Per Åsberg Sommar explains that the Riksbank, established in 1668, is the oldest central bank still in operation today. Its foundation followed the experiences of the Stockholm Banko, which faced a run due to doubts about its note stability. This led to the Riksbank being initially barred from issuing notes for ten years, highlighting critical lessons from banking crises.

How does the Riksbank's deposit facility work?

The Riksbank has implemented a deposit facility where banks must keep some of their deposits at 0% interest. This is designed to help build capital reserves that the bank might need in the future. The conversation between Beckworth and Sommar raises questions about whether this is solely for capital buildup or if it serves other purposes, like addressing the currency franchise.

What was the Riksbank's approach to price-level targeting?

From 1931 to 1937, the Riksbank adopted price-level targeting, which allowed it to adjust for previous misses in price levels. Per highlights how this was part of a broader strategy after Sweden let its currency float and aimed to stabilize the economy by pegging the krona to major currencies.

What role did the Riksbank play in early inflation targeting?

The Riksbank was an early adopter of inflation targeting, officially implementing it in 1995. This shift represented a significant evolution in its monetary policy, reflecting a growing trend among central banks to stabilize inflation expectations.

Could the Riksbank consider nominal GDP targeting?

Beckworth suggests that the Riksbank, along with other central banks, should consider nominal GDP targeting as a forward-thinking monetary policy strategy. He argues that if institutions like the Riksbank or the Reserve Bank of Australia adopt this framework, it could influence practices at the Federal Reserve.