How to write the history of the Riksbank
8 lessons for Norway from Sweden
Lars Jonung, DG ECFIN
October 31, 2008
Workshop on
Writing Central Bank and Monetary History – what are the
issues?
Organizers: The Graduate Institute, Geneva, and Norges Bank
30-31 October, Geneva
Norges Bank’s bicentenary project 1816-2016
This presentation is based on my participation in a
project, financed by the Riksbank, to write the
”modern” history of the Riksbank for the period
1945-1990 and on work following this project.
Four professors in economics were involved 19891992.
The Riksbank gave us full freedom to select the
topics for our book, the methodology, etc.
The Riksbank opened up its archives for the period
1945-1986.
Q: How do you start a project like this?
A: You gather a conference of central bank historians
I did so - in June 1989 in Copenhagen. The topic for the
conference was:
How should central bank policy be analyzed today?
Some of you here today were present in Copenhagen in
1989
Eight approaches to a history of the Riksbank:
1.
2.
3.
4.
5.
6.
7.
8.
The Riksbank as a public institution
The Riksbank as a bank for the government
The Riksbank as a guardian of a fixed exchange rate
and a stable price level
The Riksbank as a lender of last resort
The Riksbank as a regulator of the commercial
banking system
The Riksbank as a political entity
The Riksbank as an administrative body
The Riksbank examined a la Friedman-Schwartz – a
monetarist approach with M-supply data in appendices
Conclusion?
The 1989 meeting did not create unity – a common view
around one approach to writing Riksbank history.
Instead, we (”the gang of four”) decided to use many
approaches, to examine the Riksbank from several
perspectives.
We came from different backgrounds and research
interests.
Four professors and four stories/topics:
The financial system (Lars Werin)
Exchange rate policy and the IMF (Clas Wihlborg)
Housing policy (Peter Englund)
The Riksbank (Lars Jonung)
My approach to writing the history of the Riksbank.
See PM 16.
A two step strategy:
Step I.
Preparing one main narrative core – the history of the
Riksbank - identifying major trends and crucial
changes, revealing central determinants behind the
actions of the Riksbank. Searching for unifying
themes.
Organization: A chronological one.
Step II
Preparing studies of central topics/features in the history of
the Riksbank like:
- The life cycle of credit market regulations 1939-1989
- The political economy of the Riksbank (An election cycle
in Riksbank policy?)
- The relationship between the Riksbank and the
commerical banks in the conduct of monetary policy
Preparatory steps before writing:
1.
Searching all archives in the Riksbank and around the
Riksbank, checking press-releases, speeches of
Riksbank officials, preparing a bibliography of
publications on Riksbank policy
2.
Interviewing policy-makers, bankers, Riksbank staff
3.
Text analysis?
4.
The role of econometrics?
5.
The role of theory?
Preparatory steps:
Mapping the archives:
The archive of the Riksbank was a disappointment. Only
the decisions were there, not the internal debate,
different views, arguments for and against policy
measures etc.
The archives of the Bankföreningen turned out to be a
”gold mine”. The best archive on the actions of the
Riksbank was not with the Riksbank.
Preparatory steps: Interviewing decision-makers
This turned into a method of constructing an archive.
We interviewed
- One minister of finance (Gunnar Sträng)
- Several central bankers
- Several commercial bankers
Lunch with good food in the top restaurant of the Riksbank, typing all
the interviews, editing and checking them, asking for clarification,
in one case we redid the whole interview, in another case we
were refused an interview. (I offered in 2008 – 20 years later – to
do the interview).
We were at least two economists present all the time.
Interviewing decision-makers
The design of the questions is important. We sent them in
advance. We tried to have identical sets for the
Riksbank staff.
The role of the interviews? Can you trust oral history?
Yes, if carefully combined with other sources and referred
to as ”interviews”.
Large differences across the persons interviewed.
Sometimes better to interview several at a time. Group
dynamics.
Preparatory steps:
Text analysis
My idea: scan central Riksbank documents like the
annual reports to the Riksdag etc and then study the
frequency of key words like full employment, growth,
stable price level, inflation, money supply, credit,
interest rates, balance of payments, national income,
over time.
The purpose of the text analysis was to reveal how the
”Weltanschaung” of the Riksbank had evolved.
This did not work, at least not in 1990.
Preparatory steps:
The role of econometrics
An econometric history of the Riksbank?
No, for several reasons.
1.
2.
3.
4.
Unreadable volume
Out of date before it is being published
The Riksbank staff was sceptical
Impossible task – you cannot catch the long run
evolution of monetary policy by econometric
techniques, lack of data, role of personalities, learning
processes etc.
Preparatory steps:
The role of theory?
A history of the Riksbank based on one single theoretical
approach? No, for several reasons.
1.
2.
3.
4.
5.
Unreadable volume for many
Which theory would be the best to use?
The Riksbank staff was sceptical. (”We never believed
in any theory or acted according to any theory”.)
You cannot catch all the aspects of the long run
evolution of monetary policy in one theory – you need
to rely on different approaches.
Special studies are more suitable to organize as tests
of explicit theories.
My vision when I started the project:
Focus on the interaction between the Riksbank and ”the
rest of the world”.
Put the Riksbank firmly into the Swedish setting.
It was relatively easy to do this as we were writing the
modern history of the Riksbank
See Chart in PM 16 of 1989.
The Riksbank the political power game
The Riksbank in the political power game 1945-1990 (A stylized view)
3. RIKSDAGEN
(PARLIAMENT)
4. BORROWERS
- HOUSING
- INDUSTRY
- AGRICULTURE
5. LENDERS
(SAVERS)
7. THE
ECONOMISTS
(AT UNIVERSITIES
AND BANKS)
2. MINISTRY OF
FINANCE
(GOVERNMENT)
THE
RIKSBANK
8. THE PRESS
MEDIA, RADIO, TV
SPEECHES ETC
1. COMMERCIAL
BANKS
12. REMAINDER:
SOU
”REMISS”
UNIONS ETC
6. INTERNATIONAL
ORGANISATIONS
BIS, IMF, OECD,
ETC
11. OTHER
FINANCIAL
INSTITUTIONS
(INSURANCE)
10. THE ”MARKET”
(CLUB OF
BILLIONAIRES)
9. NATIONAL DEBT
OFFICE, THE APFUND (NATIONAL
PENSION SYSTEM)
Every arrow in this chart could be the subject of a thesis –
a special study
And they still are
I focused on arrow number 1
The relationship between the Riksbank and the
commercial banks
Monetary Policy-Making in a Financially
Regulated Economy: the Case of Sweden
during the Bretton Woods System.
The Monthly Meetings between the Riksbank
and the Commercial Banks, 1956-73.
A unique data base of protocols describing word
by word the arguments presented.
OPEN MARKET OPERATIONS VERSUS
OPEN MOUTH OPERATIONS
Two sets of minutes:
1. Pre-meeting discussion among the commerical
bankers. Discussing expected moves by the Riksbank
and ”best” response as well as counter-attacks
2. The actual meeting with the Riksbank
The source material (a puzzle to get it together)
Why was the system of meetings accepted?
The meetings started from the governor of the Riksbank
commenting on the most recent balance sheet of the
complete banking system as well as of every ingle
commercial bank.
It was like a school-teacher checking the lessons of
students
The Riksbank's behavior
The intermediate goals of the Riksbank. Controlling commercial
bank lending plus controlling interest rates.
The instruments of the Riksbank during the regulatory cycle
Phase I. Riksbank warnings and threats.
Phase II. The Riksbank's orders and sanctions.
Phase III. The Riksbank's exhortations.
Other Riksbank tactics against the commercial banks
Stern attitude.
Demands for explanations.
The Riksbank's restrictions: the construction program
The behavior of the commercial banks
1. The preparations by the commercial banks
2. The defense of the commercial banks
Loyalty and goodwill.
Defence arguments.
Criticisms and counter-proposals of the commercial banks
The banks' criticisms of fiscal policy.
The Riksbank's reaction.
The banks' claim for equal treatment.
Other issues raised in the meetings:
1.
2.
Evasion of controls. Bank guarantees and the gray
market. Off balance-sheet developments
Relations with the press
3.
The meetings as a bargaining process
4.
The clash of personalities and class.
(A Social Democratic Governor of the Riksbank from humble
circumstances versus the Wallenbergs and sophisticated commerical
bankers.)
How should the minutes be analyzed?
Game theory? No!
Problem with our project:
We got too much text.
• So Bengt Dennis – the governor of the Riksbank - said:
You get 400 printed pages, that is it.
• (Typical old-fashioned Riksbank rationing!)
• I had at least 500 pages of my one, about 20-30 reports
+ many interviews + subcontracted reports.
• But the restriction remained binding.
The preface was signed by Lars Werin
Stockholm August 15, 1992.
(a few weeks before the banking and currency crisis broke
out)
And published in the spring of 1993 – in the midst of the
depression
The press release in May 1993
What did it say?
Secret protocols throw new light on the actions of the
Riksbank during the postwar period
I did a ”follow-up” of the Riksbank history 10 years later:
På jakt efter ett nytt ankare (Searching for a new anchor),
SNS 2003
The aim of the book: To give an account of the move to
inflation targeting in the 1990s. ”Instant history” I wanted
to get the witnesses at the scene of the crime.
Contributions by a Riksbank staff member, three governors
of the Riksbank, an under-secretary of the ministry of
finance, a prime minister, a chief economist of a
commerical bank.
Introducton by me as editor. Difficult task as I had been involved in the policy
process from the inside of the Prime Minister’s office 1992-94...
Lessons from this experience?
The book covers a dramatic and traumatic phase in
Swedish monetary history.
When policy-makers write monetary history, there is
a risk that they write history in a way that promotes their
personal agenda, giving them the position in history that
they feel they deserve.
This risk proved well worth taking.
My view: It is a good book
but it was a challenge to edit
Lessons from Sweden for Norway:
1. Target the average member of Parliament and/or the
interested layman
(In this way, you target the media, other social sciences and nonmonetary economists)
Lessons from Sweden for Norway:
2. Publish in Norwegian and in English
(to publish just in Norwegian (or in Swedish) is like writing in the sand)
Lessons from Sweden for Norway:
3. Aim at “verstehen” – explaining why policy-makers acted
the way they did.
Avoid handing out “grades”.
Stress the informational uncertainty facing policy-makers. Try to
describe their mind-sets and incentive-structures and learning
processes of policy-makers.
Lessons from Sweden for Norway:
4. Aim at one main story, complemented with “special
studies”, boxes, appendices etc.
(Make frequent use of charts to make the story exciting - at least three
per chapter)
Lessons from Sweden for Norway:
5. Use a general narrative approach – avoid “fads”, that is
anything that will be out of fashion 10 years from now.
Lessons from Sweden for Norway:
6. Focus on the interaction between Norges Bank (the
central bank) and “the rest of Norway”, demonstrating the
relevance of monetary policy for the evolution of Norway.
Lessons from Sweden for Norway:
7. Make the writing of the history of the central bank an
interactive process – where possible.
Use interviews of policy-makers. Involve actors in the financial and
political system to comment on your text and conclusions. Test your
results on them. Be humle: they know a lot that you as researcher do
not know.
Lessons from Sweden for Norway:
8. Look beyond 2016. Leave a solid archive after you.
Start planning for the 250 year anniversary of Norges bank in 2066.
Be forward-looking. Monetary history is an ever expanding field.
How to write the history of the Riksbank
8 lessons for Norway from Sweden
Lars Jonung, DG ECFIN
October 31, 2008
Workshop on
Writing Central Bank and Monetary History – what are the
issues?
Organizers: The Graduate Institute, Geneva, and Norges Bank
30-31 October, Geneva
Norges Bank’s bicentenary project 1816-2016