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Mr. Dirk V Muir
Denmark, Finland, Norway, and Sweden form a tightly integrated region which has strong ties with the euro area as well as some exposure to Russia. Using the IMF’s Global Integrated Monetary and Fiscal model (GIMF), we examine spillovers the region could face, focusing on possible scenarios from the rest of the euro area and Russia, and the fall in global oil prices. We show that the spillovers from these scenarios differ in magnitude and impact, regardless of the high degree of integration among the four Nordic economies. These differences are driven by the fact that Denmark and Finland have no independent monetary policy, and Denmark and Norway are net energy exporters while Finland and Sweden are energy importers. We infer lessons for policy from the outcomes.
Claus Vastrup

decrease the efficiency of financial institutions and markets. Ceilings (or floors) on lending and deposit rates are in many respects preferable to quantity constraints, but financial flows tend to circumvent all kinds of artificial constraints. Similar problems arise with respect to foreign exchange restrictions, which is why these restrictions are no longer used as an instrument of monetary policy in Denmark. The liberalizations have increased competition on the financial markets, and the instruments of monetary policy have changed accordingly. Since 1985 the

Ms. Andrea Schaechter, Mr. Piero Ugolini, and Mr. Mark R. Stone

follows. The first section describes monetary policy in Denmark. The second section covers the relationship between government debt management and monetary policy, and the third section deals with reserve management and monetary policy. The paper ends with a concluding section. Monetary Policy Denmark is member of the European Union, and capital movements have been fully liberalized since 1988. Denmark has pursued a fixed exchange rate policy for two decades. European monetary cooperation has changed dramatically during this period. Since 1999, Denmark has been

International Monetary Fund

value of domestic and foreign debt minus the central government’s account with the central bank, Danmarks Nationalbank (DNB), and the assets of the Social Pension Fund (SPF). All administrative functions related to government debt management are undertaken by the DNB. Two conditions establish a dividing line between fiscal and monetary policy in Denmark. First, government borrowing is subject to a set of funding rules based on an agreement between the government and the DNB. Second, the prohibition on monetary financing in the Maastricht Treaty regulates the central

Mr. Dirk V Muir

external shock originating in the rest of the euro area or Russia. Nevertheless, the spillovers from those shocks differ in magnitude and impact, regardless of the high integration and close trade, investment, and financial links between the four Nordic economies. These differences would be driven for example by the fact that monetary policy in Denmark and Finland is set in the euro area, and Denmark and Norway are net energy exporters while Finland and Sweden are energy importers. To assess the real impact on the Nordic region from spillovers, we calibrate the IMF

International Monetary Fund

the risk premium. The Danish bond market, which is the largest in the world relative to the size of the economy, is very liquid with foreigners holding a large portion of the stock of government bonds. 6 The forward rates are implicit forward rates from the constructed yield curve based on interest rates in swap contracts of different maturities. 7 See Peter Erling Nielsen, “Monetary Policy in Denmark in the last 10 years.” in Exchange rate Policies in the Nordic Countries , edited by Johnny Åkerholm and Alberto Giovannini, Center for Economic Policy

International Monetary Fund
This paper discusses key findings of the Detailed Assessment of the Core Principles for Systemically Important Payment Systems for Denmark. The main counterparties for the assessment were Danmarks Nationalbank and the Danish Financial Supervisory Authority Finanstilsynet. The assessment recommends that the system should have a well-founded legal basis under all relevant jurisdictions. The system’s rules and procedures should enable participants to have a clear understanding of the system’s impact on each of the financial risks they incur through participation in it.
International Monetary Fund

questionnaire on payment systems. In addition, two books published by the Nationalbank were made available: Monetary Policy in Denmark, June 2003, and Payment Systems in Denmark, 2005. 2 The latter provides a thorough description of the infrastructure for the settlement of payments and securities and the risks therein. 7. During the mission, the assessor also carried out an assessment of the observance of the CPSS/IOSCO Recommendations for Securities Settlement system of Værdipapircentralen (VP), the Danish Central Securities Depository (CSD). 8. The assessor did not

International Monetary Fund
This paper describes economic developments in Denmark during 1990–96. After a prolonged period of stagnation in the second half of the 1980s and early 1990s, GDP rose by 4¼ percent in 1994, reflecting a surge in domestic demand and recovery in export markets. The expansion of GDP slowed to a 2¾ percent pace in 1995 as domestic demand moderated and as exports decelerated sharply. The slowing of external markets intensified in the course of 1995 with the result that GDP in the fourth quarter was barely above its first quarter level.