We explore the interaction of fiscal and monetary policy

Anna Seim is Professor of Economics at Stockholm University. Her research focuses on how monetary and fiscal policy affects wage formation, exchange rates and the relationship between political institutions and long-term growth. In addition to her research and teaching in macroeconomics, she holds several roles outside academia, as a member of the Board of the Swedish Financial Supervisory Authority, the Swedish Fiscal Policy Council and the Scientific Council of the Swedish National Debt Office.

Professor Anna Seim teaching in a lecture hall at Campus Albano. Photo: Björn Terring/ Stockholm University.

What is your favourite assignment as an expert in economics?

"They are all interesting and important, but I very much enjoy the work that we do in the Swedish Fiscal Policy Council, evaluating fiscal policy. Every year in May we publish an assessment of the policy implemented the preceding year. We spend days discussing different aspects of fiscal policy. Is it sustainable in the long term? Is it in line with the fiscal policy framework? All governments must abide by the same surplus target and rules for, for instance, the debt anchor. The council’s report is then handed over to the Minister of Finance and a hearing is held in the Committee on Finance. As an expert, you are not supposed to decide on policy, but you can assess whether different policy measures are efficient or inefficient, and if they breach the fiscal policy framework."

What first appealed to me was that, as an economist, you may build microcosms that may serve as laboratories.

What does a researcher in economics do?

"Simply put, economists develop mathematical and statistical models to describe how the economy works. Theoretical models are based on simplifying assumptions about the preferences of different actors, such as households, firms, trade unions, governments or central banks. We then study their optimal choices in equilibrium and analyse how different outcomes are affected when we change something in the model - typically economic policy."

But is economics all about adding and subtracting?

"Theoretical models are basically pure maths, you work with different mathematical functions and find an equilibrium. What first appealed to me was that, as an economist, you may build microcosms that may serve as laboratories. I am always very happy when I get to do algebra. But economics is also about understanding data. Theoretical models are useless if they do not have anything to say about reality. Economic research is at its best when theory and empirics are combined."

Why is the subject of economics so exciting?

"When you think of economics, you often think of interest rates and GDP, but it is really about understanding why households and firms behave the way they do, understanding human behaviour. The economy is like a giant organism where the micro-decisions made by households and firms affect the outcome. Economic players have free will and, taken together, individual decisions can have major consequences. This is also what makes the economy difficult to predict. It is not governed by laws of nature."

Whenever we discuss economic policy, the students become particularly enthusiastic and ask lots of questions. This is fun!

Photo: Rickard Kilström

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How do you pass on your expertise to your students?

"One of the courses I teach is Intermediate Macroeconomics in the second semester of our programmes. We discuss concepts and models and talk about economic policy. Here I can really draw on my experiences from the Fiscal Policy Council and other expert assignments. I reckon have taught more than 2500 students over the years, who hopefully now know a bit more about fiscal and monetary policy. Whenever we discuss economic policy, the students become particularly enthusiastic and ask lots of questions. This is fun! We also debate a lot. For example: Should we adopt the euro as our currency?"

"Since we are a multidisciplinary university, we can work interdisciplinary in a way that schools focusing solely on economics cannot. For example, we can combine economics with climate research. By cooperating with, for example, the Department of Law and the Department of Political Science, our programmes become more comprehensive."

What are your next research projects?

"One exciting project addresses why the exchange rate tends to depreciate in small open economies like Sweden in times of global uncertainty. We will build a model able to shed light on this issue. This will involve studying, for instance, the impact of the war in Ukraine, which has strengthened the dollar. One research question is: Why is there a flight to major currencies in times of turmoil?"

How do you maintain interest in the field at all times?

"What is it that saying? Find a job you enjoy doing, and you will never have to work a day in your life.”