The krona thus appreciates today before moving towards the same anticipated future exchange rate as previously. However, empirical support for uncovered interest rate parity is mixed.1 As in all empirical analysis, it is difficult to isolate the effects of interest rate differentials on the exchange rate. Furthermore, there are difficulties in measuring expectations, and there may be frictions on the financial markets that mean that the relationship does not fully hold true. Be that as it may, the presence of other factors complicating the relationship is hardly reason to completely disregard it. 1  See, for example, Chinn and Meredith (2004) for an outline and Lothian and Wu (2011) for a recently published empirical study. BIS central bankers’ speeches  3  The exchange rate is volatile Another circumstance complicating the analysis is the tendency for floating exchange rates to be highly volatile. This is illustrated in Figure 3, which shows the development of the krona’s trade-weighted exchange rate. The figure shows that the krona can both depreciate and appreciate to a relatively large degree over relatively short periods. For example, the krona depreciated by almost 20 per cent in TCW terms between the second quarter of 2008 and the first quarter of 2009. Unease on the financial markets, which tends to weaken comparatively small currencies like Sweden’s, contributed towards this. Following this, the krona appreciated strongly and now lies at approximately the same level as prior to the financial crisis.
Overall, as of January of this year, we are down nearly 10 million jobs from the pre-pandemic level, a greater shortfall than we saw even at the worst point of the aftermath of the Great Recession. Locally, we’ve experienced considerable strain, given that much of New York City’s economy hinges on the leisure and hospitality industry. Job losses have been dramatic: New York was hardest hit at the start of the pandemic, and almost a year later the data still show a city under stress. While national employment was 7 percent below pre-pandemic levels at the end of 2020, employment in New York City was 12 percent lower.1 I hope that as workers return to their offices and the weather turns warmer we will start to see people frequenting the small businesses that are the lifeblood of our city. Unfortunately, job losses have not been only highly concentrated in particular industries, but also more concentrated among certain demographic groups. The pandemic and the ensuing economic downturn have done disproportionate harm to women, communities of color, younger workers, and the lowest paid.2 The data are particularly sobering when we look at communities of color. Recent research by my colleagues at the New York Fed shows that more Black and Hispanic workers lost jobs compared to white workers, and Black workers have been more likely to drop out of the labor force entirely, making it more challenging to rejoin in the future.