Scandinavian Monetary Union

NOTOC The Scandinavian Monetary Union was a monetary union formed by Denmark and Sweden on 5 May 1873, with Norway joining in 1875. It established a common currency unit, the krone/krona, based on the gold standard. It was one of the few tangible results of the Scandinavian political movement of the 19th century. The union ended during World War I. The original Scandinavian currencies were based on the silver Reichsthaler, defined by the Hamburg Bank as 25.28 grams fine silver, which was equal to one Norwegian speciedaler or two Danish rigsdaler. Sweden's riksdaler specie was slightly heavier at 25.5 g and was equal to four Swedish riksdaler riksgalds. The Scandinavian switch to the gold standard was triggered by Germany's adoption of the German gold mark in 1873 and of the consequent disturbance in the silver market. The monetary union established the gold krone (krona in Swedish) replacing the legacy currencies at the rate of 1 krone = 1 Swedish riksdaler = Danish rigsdaler = Norwegian speciedaler = Hamburg reichsthaler. The latter's conversion to 4.50 German gold marks (hence, 1 krone = 1.125 marks) established the gold parity of the krone: one gram of fine gold worth 2.79 marks was equivalent to 2.48 krone (or 0.4032 g gold per krone). The British pound (the "world currency" of the time) was equal to 18.16 kroner, and the franc of France and the Latin Monetary Union was worth 0.72 krone. Sweden's long-established tradition of using paper currency eased the implementation of a Gold Exchange Standard wherein gold coins rarely circulated but the respective central banks (the Sveriges Riksbank, Danmarks Nationalbank and Norges Bank) centralized their respective gold reserves and guaranteed the conversion of krone banknotes to gold for export purposes. The union provided fixed exchange rates and stability in monetary terms, but the member countries continued to issue their own separate currencies. Although not initially foreseen, the perceived security led to a situation where the formally separate currencies were accepted on a basis of "as good as" the legal tender virtually throughout the entire area.

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French franc

The franc (fræŋk; franc français, fʁɑ̃ fʁɑ̃sɛ; sign: F or Fr), also commonly distinguished as the French franc (FF), was a currency of France. Between 1360 and 1641, it was the name of coins worth 1 livre tournois and it remained in common parlance as a term for this amount of money. It was reintroduced (in decimal form) in 1795. After two centuries of inflation, it was redenominated in 1960, with each new franc (NF) being worth 100 old francs. The NF designation was continued for a few years before the currency returned to being simply the franc.

Sveriges Riksbank

Sveriges Riksbank, or simply the Riksbank, is the central bank of Sweden. It is the world's oldest surviving central bank, and the fourth oldest bank in operation. The first part of the word riksbank, riks, stems from the Swedish word rike, which means realm, kingdom, empire or nation in English. A literal English translation of the bank's name could thus be Sweden's Realm's Bank. The bank, however, doesn't translate its name to English but uses its Swedish name the Riksbank also in its English communications.

Economy of Sweden

The economy of Sweden is a highly developed export-oriented economy, aided by timber, hydropower, and iron ore. These constitute the resource base of an economy oriented toward foreign trade. The main industries include motor vehicles, telecommunications, pharmaceuticals, industrial machines, precision equipment, chemical goods, home goods and appliances, forestry, iron, and steel. Traditionally, Sweden relied on a modern agricultural economy that employed over half the domestic workforce.

On the Benefits of a Monetary Union: does it pay to be bigger?

Chiara Forlati

A two area dynamic stochastic general equilibrium model is employed to investigate the welfare implications of losing monetary independence. Two policy regimes are compared: (i) in one area there is a common currency, while in the other area countries stil ...

Center for Fiscal Policy Working Paper Series2009

Optimal Fiscal Policy in a Monetary Union

Luisa Lambertini

We study optimal fiscal policy in a monetary union where monetary policy is decided by an independent central bank. We consider a two-country model with trade in goods and assets, augmented with sticky prices, labor income taxes and stochastic government c ...

Center for Fiscal Policy Working Paper Series2007