Recent Economic and Monetary Trends

 

THE DANISH AND INTERNATIONAL ECONOMY

Can Crises be Predicted?

Morten Spange, Economics

In 2008, the global economy was hit by a crisis that caught almost all economists in Denmark and abroad by surprise. Against this backdrop, it is discussed why it was not possible to predict this sharp reversal of the economy, which was the result of certain underlying imbalances. Looking ahead, a key issue is how to improve the ability to identify economic imbalances with negative consequences for growth and employment. In this connection, the Bank for International Settlements, BIS, and the International Monetary Fund, IMF, have constructed indicators of economic imbalances.

Financing, Investment and Consumption in Denmark and the Euro Area

Agnethe Christensen, Carina Kjersgaard Friis and Elena Kabatchenko, Statistics

With the introduction of quarterly financial sector accounts from January 2010 consistency has been achieved between the real and financial sides of the quarterly sectoral national accounts. This paves the way for one consistent framework for analysing developments in important financial and real macroeconomic elements, which may contribute to a better understanding of the interaction between the financial sector and the real economy. This article focuses on the financial and real transactions of Danish households and business enterprises and the related significant development in consumption and investment during the most recent economic cycle. A comparison is made with the euro area.

Foreign-Exchange Earnings in the Shipping Sector

Anders Ejstrup and Caroline Bindslev, Statistics

Sea freight has been of increasing significance to Denmark's exports and imports. This article focuses on the shipping sector's foreign-exchange earnings. Sea freight revenue and expenditure are both included in the Danish balance of payments, but are distributed on several items. This article provides a comprehensive overview and highlights the items of significance to foreign-exchange earnings.

Fiscal Challenges in Advanced Countries

Jakob Ekholdt Christensen and Rasmus Tommerup, Economics

The global economic crisis has led to historical deterioration of the public finances of the advanced countries. In the countries most severely affected, the development has generated concerns about an outright debt crisis. For many advanced countries, government debt as a ratio of the gross domestic product, GDP, will rise to more than 100 per cent if they fail to implement fiscal consolidation in the coming years. The higher debt as a result of higher interest payments will make future consolidation more difficult. Moreover, new research shows that a large debt impedes economic growth through such factors as elevated real interest rates. The extent and duration of the necessary fiscal consolidation are of a magnitude rarely seen in recent times. ´The need for consolidation is most pronounced in Japan, Greece, the USA, Ireland and the UK.

Gross Domestic Product and Welfare

Paul Lassenius Kramp, Economics

The gross domestic product, GDP is regularly criticised for not presenting a fair view of welfare, and for not including sustainability. This article discusses the strengths and weaknesses of GDP as a measure of economic prosperity. It also discusses the relations between prosperity and welfare, as well as alternative indicators of welfare and sustainability.

 

FINANCIAL CONDITIONS

Do Long-Term Bonds Offer a Higher Return than Short-Term Bonds?

Søren Schrøder and Christian Stampe Sørensen, Financial Markets

Long-term bonds have on average yielded a higher return than short-term bonds since 1975 so that it has paid off to assume interest-rate risk. However, the excess return has varied widely over time. It is not certain that long-term bonds will always yield a higher return than short-term bonds. This article describes the relation between the current yield curve and the expected excess return, and explains why the excess return has varied over time.

Pledging of Collateral to Danmarks Nationalbank

Astrid Henneberg Poffet, Payment Systems

In the wake of the financial crisis attention has increasingly turned to the collateral framework for credit granted by central banks. The increased focus on central banks' collateral frameworks entails a need to communicate Danmarks Nationalbank's underlying considerations when determining which assets monetary-policy counterparties may pledge as collateral for credit, i.e. the collateral basis. This article explains why central banks require collateral in return for credit facilities, as well as the considerations and country-specific circumstances to be taken into account when determining the collateral basis, including at Danmarks Nationalbank. This is followed by an overview of Danmarks Nationalbank's rules for asset eligibility and the temporary credit facilities introduced during the financial crisis.

Non-Callable Loans for Cooperative Housing Societies

Ib Hansen and Hans Henrik Knudsen, Market Operations

In recent years, the range of mortgage-credit products has been developed substantially and in some cases the consequences of the financing structures are not easy to understand. Some, especially new, cooperative housing societies have taken out quite risky non-callable loans with rising interest payments. The structure of these loans makes it difficult to understand the financial consequences, such as potential price losses if interest rates decline and the impact of rising debt service payments.

 

DOCUMENTATION

New Calculation of Danmarks Nationalbank's Effective Krone-Rate Index

Erik Haller Pedersen and Mikkel Plagborg-Møller, Economics

From time to time changing trade patterns make it necessary to revise the weights used for calculating the effective krone-rate index and real effective krone-rate index published by Danmarks Nationalbank. This article presents the 2009 weights. The most important changes are that the weight of the Chinese yuan has been increased, while the weight of the pound sterling has been reduced.

Speech by Governor Nils Bernstein at the Annual Meeting of the Danish Mortgage Banks' Federation, 24 March 2010

Speech by Governor Nils Bernstein at the Annual Meeting of the Association of Danish Mortgage Banks, 22 April 2010

Press Releases

Tables and Graphs Section

Vol. XLIX, No. 2