Contents

Recent Economic and Monetary Trends

The Danish Economy 2007-09

Turmoil in the Financial Markets
Jakob Windfeld Lund, Financial Markets
This article describes the background to the recent turmoil in the financial markets. Credit risk on US subprime mortgages has been resold internationally via structured credit products and new types of leveraged investment vehicle. Model calculations showed a low risk of loss on these products, which was supported by rating agencies. In addition, European banks, among others, supplied liquidity. Over the summer, risk premia increased, and liquidity in the financial markets decreased.

Petrodollars, Portfolio Restructuring and Long-Term Interest Rates
Thomas Barnebeck Andersen, Sofie Nedergård Fick and Frank Øland Hansen, Financial Markets
Oil prices have more than tripled since 2002, and the current-account surpluses of the oil-exporting countries have grown substantially so that these countries now increasingly finance the US current-account deficit. Initially the high savings propensity of the oil-exporting countries exerted downward pressure on long-term interest rates. As the risk appetite of the oil exporters has increased, their investment strategies have changed, and a shift to more risky assets has been observed. This has reduced the demand for government bonds.

Status of the Faroese Economy, Mid-2007
Niels Bartholdy, Economics
The Faroese economy is booming. Employment has risen, particularly in the building sector and the financial sector, and unemployment was down to 1.4 per cent in July 2007. The fish-processing industry is affected by labour shortages. A strong increase in imports of e.g. consumer goods and cars has led to larger trade deficits. The government had a surplus in 2006, and the same is expected to be the case in 2007.

The Effective Krone Rate and Trade in Services
Erik Haller Pedersen, Economics
The effective krone rate is calculated using weights based on trade in manufactured goods in 2002. Calculation of the weights in the traditional krone rate index requires the construction of a trade matrix based on an international data set. This article applies a method for approximate updating of the weights, based solely on trade data from Statistics Denmark. It is used to assess the robustness of the weight calculations to the choice of base year, as well as the significance of including trade in services.

The Directive on Payment Services
Anders Mølgaard Pedersen, Payment Systems
The new EU Directive on Payment Services will harmonise the European rules on consumers' and enterprises' electronic payments and the access to provide payment services. The Directive establishes the basis for an internal market for payments and ensures that payments can be executed more rapidly, reliably and cheaply in the EU.

Press Releases

Tables and Graphs Section

Vol. XLVI, No. 3