However, it is unclear whether the purchases contributed to the exchange rate remaining weak, and – above all – whether the economy was stimulated by the lower long-term rates. The Riksbank’s purchases pushed down yields on securities Let me begin with yields on government securities, which fell. On the surface, this looks like a typical portfolio balance effect that has been highlighted in many studies, for instance Vayanos and Vila (2021). The idea is that the policy rate is limited by its lower bound, but that the yield curve slopes upwards so that interest rates at longer maturities can be pushed down. When the central bank buys government bonds with long maturities, investors who want debt instruments with long maturities need to seek other investments. This means that prices rise, that is, the rates fall, also on other assets with long maturities. As borrowers then gain access to cheaper financing, monetary policy has become more expansionary. But for several reasons, this was not really how it worked in Sweden. Certainly, rates on government securities appear to have fallen. This is supported by event studies which investigate how market rates are affected by new information on asset purchases.5 Erikson (2021) also finds that rates on government securities fell apace with the Riksbank's holdings increasing from 2015 to 2017, but he shows that the rate fell on the shortest maturities.
After falling by 3.1 percent in 2009, growth in real GDP averaged 2.4 percent in 2010, 1.8 percent in 2011 and 2.2 percent in 2012, a consistent but sluggish pace. This sluggishness has been quite evident in the labor market. After falling by 421,000 per month in 2009, payroll employment grew by 85,000 per month in 2010, 175,000 per month in 2011, and 181,000 in 2012. To put these numbers in perspective, the trend rate of growth of the civilian non-institutional population is around 200,000 per month. The unemployment rate has declined from a peak of 10 percent in October of 2009 to just under 8 percent recently, due largely to the fact that the labor force participation rate has declined by considerably more than would be suggested by underlying demographic trends. Fortunately, long-term unemployment, defined as those unemployed for 15 weeks or longer, has declined from nearly 9 million in the first quarter of 2010 to about 6.6 million in recent months – a decline of 28 percent. The median duration of unemployment has declined from 23 weeks in the second quarter of 2010 to 16 weeks recently. Nonetheless, as of January there were still about 3.2 million fewer jobs than at the end of 2007. The unemployment rate remains elevated, despite a significant decline of the labor force participation rate. And the ratio of employment to population in January was lower than it was at the end of the recession, indicating that employment growth has not kept pace with population growth.