Svar till Andersson och Jonung (Reply to Andersson and Jonung, in Swedish)

Fredrik Andersson och Lars Jonung framför kritik mot min analys av och mina slutsatser om Riksbankens penningpolitik, dels i en artikel i Ekonomisk Debatt 3/2014 (Andersson och Jonung 2014), dels i en intervju av Jonung i Dagens industri 2014-04-17. Här är mitt svar.

Kritiken kan sammanfattas i tre punkter:

(1) I motsats till vad jag hävdat (t.ex. i Svensson 2014), har Riksbanken uppfyllt inflationsmålet.

(2) Min skattning i Svensson (2013a), av hur mycket högre den genomsnittliga arbetslösheten under 1997-2011 blivit på grund av lägre inflation än målet, är inte robust. Den bygger på en för enkel modell och bortser från att inflationsförväntningarna har varierat. Mina resultat håller inte om hänsyn tas till varierande inflationsförväntningar.

(3) Riksbanken har begränsad möjlighet att genom penningpolitiken påverka sysselsättning och arbetslöshet i en liten öppen ekonomi som den svenska. Riksbanken bör inte ha sysselsättning och arbetslöshet som mål.

Andersson och Jonung tycks dock missta sig på samtliga punkter.      Continue reading

Misleading statement in interview with Kenneth Rogoff in Svenska Dagbladet

In an interview today, April 16, in Svenska Dagbladet, Kenneth Rogoff is quoted as saying (my translation from Swedish):

“I know that there are commentators, such as Lars EO Svensson, who don’t believe that debt is affected by interest rates.”

It is wrong to say that I would believe that debt is not affected by interest rates. Instead, some of my work has dealt with precisely how monetary policy affects household indebtedness. For instance, this paper deals with how monetary policy affects real debt and the debt-to-GDP ratio.

My view, and the result of the Riksbank’s own calculations (se here and here), is that the impact of monetary policy on household real debt and debt ratios in Sweden is normally very small (and may even be of either sign). The impact on any risks associated with household debt is negligible. Therefore, monetary policy in Sweden should focus on the traditional objectives of monetary policy, namely to stabilize inflation around the inflation target and unemployment around a long-run sustainable rate.

Deflation in Sweden: Questions and answers

New Ekonomistas post (in Swedish). This is an English translation.

Sweden has deflation, that is, negative inflation. According to Statistics Sweden, CPI inflation in March was minus 0.6 percent. As we can see in the figure below, CPI inflation has been around zero since November 2012, and since January 2014 it has been negative. CPIF and HICP inflation i March was zero and minus 0.4 percent, respectively. We see that CPIF and HICP inflation has been on a downward trend since the summer of 2013. The inflation rate in Sweden is now among the lowest in the world. What has caused the deflation, what are its consequences, could Sweden end up in a similar situation as Japan, and what can be done about the problem?

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The Riksbank’s continued contradictions and evasive answers about household debt

English translation of Ekonomistas post (in Swedish).

At the latest policy meeting and decision, the Riksbank repeated its statements that a lower policy rate would increase the risks associated with household indebtedness. At the same time these statements are contradicted by the Riksbank’s own analysis. On a direct question about this at the latest press conference, Governor Ingves continues to give evasive answers.

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The Riksbank’s account of monetary policy to the Riksdag hides that its own calculations support the minority

New Ekonomistas post (in Swedish). This is an English translation.

The Riksbank has recently delivered an account of monetary policy in 2013 to the Riksdag for the Finance Committee’s annual assessment of the monetary policy. This account is clearly a biased account from the majority of the Riksbank’s executive board, since it hides that the Riksbank’s own calculations support the minority.  Continue reading

Ekonomistas: Ingves about low inflation and increased debt burden: “The inflation rate is not a particularly significant issue”

New Ekonomistas post (in English). This is an English translation.

That low inflation and deflation increases the debt burden is well known to many. For instance, under the heading ”The spectre of eurozone deflation,” Martin Wolf recently wrote in the Financial Times: ”While falling prices would improve competitiveness, they would raise the real burden of private and public debt. This might well create another round of financial stresses.” Lower inflation than expected leads to higher real debt than anticipated and planned, and thereby increases the debt burden. In Sweden, a zero inflation rate during the last two years has led to real debt increasing in two years by SEK 40 000 for each borrowed SEK million, compared to if inflation had equaled the inflation target of 2 percent. But is this known and understood in the Riksbank? At the press conference after the publication of the Financial Stability Report on November 28, Governor Ingves was asked, if the low inflation rate made household indebtedness worse. What did he reply? Continue reading

Ekonomistas: Misleading op-ed from Riksbank Deputy Governors Jansson and Skingsley

New Ekonomistas post (in Swedish). Here is an English translation.

In an op-ed in the Swedish newspaper Dagens Nyheter on March 16, ”Felsyn att Riksbanken bara fokuserar på bostadsbubbla” (“Error in judgment that the Riksbank only focuses on a housing bubble,” in Swedish, my translation), Deputy Governors Per Jansson and Cecilia Skingsley repeat the statement that the Riksbank is not deviating from its mandate. They say this in spite of the fact that Riksbank’s “leaning against the wind” policy has led to inflation far below the target and unemployment far above a reasonable sustainable rate. They maintain that the higher policy rate, by checking increases in housing prices and household debt, would reduce the long-run risk of a future crisis and an accompanying worse macroeconomic outcome. But, strangely enough, they are quiet about the Riksbank’s own estimate that the policy rate has no long-run effect on household debt. Thereby their reasoning does not stand up to scrutiny, and the conclusion that the Riksbank is deviating from its mandate stands.  Continue reading

Ekonomistas: Governor Ingves responds regarding the policy-rate effect on household debt

New Ekonomistas post (in Swedish). Here is an English translation.

According to the Riksbank’s own estimate, the policy-rate effect on household debt is so small that one can maintain that it is neither economically nor statistically significant. What did Governor Stefan Ingves answer to a question about this at a hearing in the Riksdag’s Finance Committee?  Continue reading