I have given a series of lectures in Tirana, Albania, on October 20-22, 2014. They are available here.
In a detailed interview with the News Agency Direkt, then Riksbank Deputy Governor Karolina Ekholm reveals how the Riksbank’s judgmental adjustments of the model forecasts have given the Riksbank’s inflation forecasts an upward bias. She also points out that I warned about this upward bias and explicitly entered reservations about the inflation forecast from december 2012. It was thus not a secret at the Riksbank that there were problems with the forecast. Continue reading
New Ekonomistas post. This is an English translation.
As is well known, the Riksbank frequently publishes a figure of the debt-to-income ratio, that is, household debt as a percentage of disposable income. But the debt-to-income ratio is an unsuitable risk measure, since it at a closer look hardly gives any information about any risks with household debt. Among aggregate risk measures, the interest-to-income ratio, that is, household interest payments as a percentage of disposable income, is a better measure, since a low interest-to-income ratio indicates good payment capacity and resilience against interest-rate increases. The debt-to-assets ratio, that is, household debt as a percentage of total assets, is also a better risk measure, since a low debt-to-assets ratio means a high net worth-to-assets ratio and high resilience against a fall in asset values. In order to present the best possible information and to avoid giving a misleading impression, figures of these measures should be published instead. If one still insists on publishing the debt-to-income ratio, on should always also publish the better measures, the interest-to-income and debt-to-total-assets ratios. Continue reading
[English translation of new Ekonomistas post.]
IMF’s annual so-called Article IV report on Sweden is now available on IMF’s web site. I have previously noted that the IMF mission’s concluding statement in June was partial and biased. The final report continues in the same vein. Given that the report to a large extent deals with household debt, it is particularly remarkable that it contains crucial factual errors about household debt and misleading information about housing prices. It gives the definite impression of having been guided by preconceptions rather than facts and analysis. Continue reading
[English translation of a new Ekonomistas post (in Swedish).]
At the latest monetary-policy meeting, Governor Stefan Ingves and First Deputy Governor Kerstin af Jochnick dissented and entered a reservation against the decision to lower the policy rate to 0,25 percent and against the policy-rate path in the Monetary Policy Report. They obviously thought that their preferred policy-rate path would imply a less expansionary monetary policy than the majority’s path. But their path instead actually seems to imply a more expansionary monetary policy, since it apparently implies a lower average policy rate during the forecasting period. Continue reading
“Riksbanken kan inte upprätthålla finansiell stabilitet genom att debattera” (in Swedish), 2nd reply to Carl B. Hamilton on di.se, the website of Dagens Industri. Also on Ekonomistas (in Swedish, with links).
Carl B. Hamilton seems to think that the Riksbank by op-eds, analyses and discussions in the new Financial Stability Council has sufficient instruments to affect financial stability to warrant financial stability as an objective. But the Council is only a forum for discussions and cannot make decisions. Since the Riksbank has no decision power over micro- and macroprudential instruments (that power is with Finansinspektionen, the Swedish FSA), the Riksbank cannot be accountable for financial stability and not have financial stability as an objective. Continue reading
[English translation of new Economistas post (in Swedish).]
The household debt ratio – household debt as a percentage of disposable income – is an unsuitable risk measure and there are much better ones. In spite of this, the Riksbank and others attach large weight to how the debt ratio develops. For those who consider the debt ratio a relevant risk measure, it should be somewhat comforting that the debt ratio fell somewhat in the first quarter of 2014, in contrast to some alarmist warnings about rapidly increasing debt. Continue reading
New Ekonomistas post. Here is an English translation.
Wolfgang Münchau (“What central banks should do to deal with bubbles,” Financial Times, July 14) has stated that a monetary policy experiment with calamitous results has been conducted in Sweden. A letter to Financial Times from Stefan Ingves and Per Jansson, Governor and Deputy Governor of the Riksbank, (“Monetary policy has had positive results in Sweden,” July 24) tries to defend the Riksbank’s policy. But the letter is full of misleading statements and the defense does not stand up to scrutiny. Continue reading
(English translation of an article of mine on the website of the Swedish business newspaper Dagens Industri, July 21, 2014.)
Should the Riksbank have financial stability as an objective besides price stability? According to an op-ed by Carl B. Hamilton in Dagens Industri on July 17, the answer is yes. According to Hamilton, this is even a practice already established by the Riksdag (the Swedish parliament). The Riksbank Act needs to be amended, but only as a formality.
But Hamilton forgets that the Riksbank has no effective policy instruments to affect financial stability, except in connection with the management of financial crises. He also forgets that the government with the support of seven parties in the Riksdag – including Folkpartiet (the Liberal Party) – has decided that the Riksbank will not receive any such instruments. Without the instruments, the Riksbank neither can nor should have financial stability as an objective. Continue reading
(Debattartikel publicerad under rubriken “Inga medel, därför inget mål” på Dagens Industris websida 2014-07-21.)
Ska Riksbanken ha finansiell stabilitet som mål vid sidan av prisstabilitet? Enligt Carl B Hamiltons debattartikel i Dagens Industri den 17 juli är svaret ja. Det är till och med en av riksdagen redan etablerad princip, hävdar Hamilton. Riksbankslagen behöver ändras, men bara som en formalitet.
Men Hamilton glömmer att Riksbanken saknar effektiva medel att påverka den finansiella stabiliteten, utom i samband med hanteringen av finansiella kriser. Han glömmer också att regeringen med stöd av sju partier i riksdagen – inklusive Folkpartiet – beslutat att Riksbanken heller inte ska tilldelas några sådana medel. Utan medel varken kan eller bör Riksbanken ha finansiell stabilitet som mål. Continue reading
Comment on Chung, Herbst, and Kiley, ”Effective Monetary Policy Strategies in New Keynesian Models: A Re-examination”, presented at NBER’s 29th Annual Conference on Macroeconomics, April 11-12, 2014, Cambridge, MA.
The Economist writes about Swedish monetary policy in its latest issue: “Subzero conditions – interest rates are back at crisis lows.”