An Analysis of the European Exchange Rate Mechanism: The case of Sweden

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Recommended: Trade and investments of Sweden

Introduction
Sweden joined the European Union on 1 January 1995, but unlike most Member States, Sweden has not adopted the Euro yet. In fact, Sweden has not even been in the European Exchange Rate Mechanism (ERM) yet. Why doesn’t Sweden want to join the Eurozone and did they make the right choice by doing so?
The first part of this report examines various international trade economic indicators of Sweden. In particular, we examine Real Effective Exchange Rate, GDP, Trade Balance, Current account and Savings-Investment Difference. We analyze and compare these indicators to explore the country’s performance, and to relate them, to the extent that is possible, to the exchange rate regime. Also a comparison between before and after the entry of the European is made. The paper starts off with an overview of the exchange rate mechanism (ERM), Sweden’s position towards the ERM and the European Union, and an introduction to the Swedish economy that serves as a framework for the empirical analysis of the indicators.
The second part of this report evaluates the performance of the teamwork done in the elaboration of this project. How did the cooperation elapse? What went well and what actually did not? How can this be improved, what were the differences between the team members and how did we effectively make use of this? Furthermore, an application of DiStefano & Maznevski (2000) is made.
Introduction to Sweden’s economy
Sweden has a developed economy orientated towards foreign trade with telecommunication, automotive and pharmaceutical being the biggest industries. Their biggest trading partners are Germany, United States, Norway, United Kingdom, Denmark and Finland. Half of their output and exports are generated in the engineering sector ...

... middle of paper ...

...r a small lag the savings-investment difference falls by about 2 %.
Figure 6. Evolution of Savings-Investment difference and REER.
Source: World Bank Data Bank.

Works Cited

European Union. (2013, 09 04). What is ERM II? Retrieved from ec.europa.eu: http://ec.europa.eu/economy_finance/euro/adoption/erm2/index_en.htm
Feenstra, R. C., & Taylor, A. M. (2011). The Euro. In R. C. Feenstra, & A. M. Taylor, International Economics (pp. 814-815). New York: Worth Publishers.
Reade, J. J., & Volz, U. (2009, August). TOO MUCH TO LOSE, OR MORE TO GAIN? . DEPARTMENT OF ECONOMICS DISCUSSION PAPER SERIES , pp. 1-32.
The Economist Newspaper Limited. (2003, 09 18). www.economist.com. Retrieved from The Economist: http://www.economist.com/node/2072849
World Bank. (2014). Trade indicators. Data retrieved May 4, 2014, from World DataBank: World Development Indicators.

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