Leaning Against the Leaners
Article in Central Banking 24-2 (November 2013) 27-36.
There is much debate in Sweden and further afield about the use of monetary policy – rather than macro- and micro-prudential tools – to ‘lean against the wind’ as a way of preventing dangerous bubbles building up in economies. This article looks at whether, under a mandate of flexible inflation targeting, household debt should be introduced as an additional target for monetary policy. It also reviews how to conduct policy evaluation, drawing on six years of experience gained as a policymaker at the Sveriges Riksbank.
This entry was posted in Articles, New on November 30, 2013 by admin.	
Op-ed in Expressen: Thank the interest-rate hawks for increased indebtedness (in Swedish)
Op-ed in Expressen, page 4, Debate, November 28, 2013 (in Swedish).
Essentially a translation of the EconoMonitor blog “The Perils of Zero Inflation for Swedish Household Debt.”
This entry was posted in Debate, Media, New on November 28, 2013 by admin.	
Debattartikel i Expressen: Tacka räntehökarna för växande skulder
“Istället för att begränsa hushållens skulder har penningpolitiken ökat skuldsättningen – Riksbanken måste nu ta konsekvenserna”, skriver Lars E.O. Svensson
Debattartikel i Expressen, sidan 4, Debatt, torsdag 28 november 2013: Continue reading →
This entry was posted in Articles, Debate, Ekonomistas, Media, New on November 28, 2013 by admin.	
De senaste årens penningpolitik (The monetary policy of the last few years, in Swedish)
“De senaste årens penningpolitik”(“The monetary policy of the last few years”), presentation at Nationalekonomiska föreningen (The Swedish Economic Association), Stockholm School of Economics, November 26, 2013. Slides (in Swedish).
New publication: “Some Lessons from Six Years of Practical Inflation Targeting,” Sveriges Riksbank Economic Review 2013:3, 29-80. Continue reading →
This entry was posted in New, Papers on November 25, 2013 by admin.	
Ekonomistas post (in Swedish) about worthwhile readings lately about the Rikbank. Here in English (except Wolodarski’s column): Continue reading →
EconoMonitor: The Perils of Zero Inflation for Swedish Household Debt
New blog at EconoMonitor: The Perils of Zero Inflation for Swedish Household debt.
This entry was posted in Blog post, EconoMonitor, New on November 21, 2013 by admin.	
New revision, November 2013 Continue reading →
Participation in Ekonomiklubben (The Economics Club), Axess TV: Deflation, debt, bank profits,… (in Swedish)
Participation in Ekonomiklubben (The Economics Club), Axess TV, Thursday, November 14, 2013 (in Swedish). Martin Ådahl, Villy Bergström, Heide Elmér, Pehr Wissén and I discuss deflation, household debt, bank profits, and other things. See the program here (requires subscription to the magazine Axess).
This entry was posted in Media, New, TV on November 14, 2013 by admin.	
Zero inflation leads to higher debt, substantially higher debt
The most recent observation of CPI inflation from Statistics Sweden is negative, minus 0.1 percent. The inflation rate has been around zero since November 2012. This means that the CPI index, the general price level, is now at the same level as two years ago, November 2011. If the inflation rate had been 2 percent, the price level would now have been 4 percent higher than it was in November 2011.
That the inflation rate is so low has substantial consequences for household indebtedness. The real value of household debt has become 4 percent higher than if the inflation rate had been 2 percent the last two years. For every borrowed SEK million, the borrower has made a capital loss of SEK 40 000. Furthermore, with low inflation, the nominal value of housing has become lower, in contrast to the nominal debt. Therefore the loan-to-value (LTV) ratio has become higher. A new mortgage in November 2011 has now an LTV ratio that is 4 percent higher than if inflation had been 2 percent. Continue reading →
The Economist: On escaping the zero lower bound
The Economist’s Free Exchange blog discusses ways of escaping from the zero lower bound, including the Foolproof Way of Escaping from a Liquidity Trap.
This entry was posted in Media, New, Papers on November 10, 2013 by admin.	
The Riksbank has systematically neglected the inflation target by keeping inflation significantly lower than the target of 2 percent. This Ekonomistas post summarizes the real-economy consequences of this that I have covered in several previous posts. Since expectations of inflation in the short and longer run have been close to the target, average inflation has fallen significantly below expected inflation. This causes real consequences in the form of higher unemployment, an unexpected and unwelcome increase in the real value of household debt, and an unwelcome transfer of wealth from households to banks. The Riksbank thereby counteracts not only the work of the Government and the Riksdag to achieve the most important objective of economic policy, full employment, it also counteracts Finansinspektionen’s (the Swedish Financial Supervisory Authority) work to maintain financial stability and consumer protection in financial area. Continue reading →