How can the Riksdag’s Finance Committee and others assess whether or not the Riksbank fulfills its price-stability objective? Especially since this is made difficult since the Riksbank does not have perfect control over the inflation rate and the inflation rate cannot always be exactly on the target. But it can indeed be done, by comparing average inflation over a longer period with the inflation target, and by also comparing with target fulfilment in other countries with inflation targets to judge what is possible. Continue reading
Guest at Ekonomiklubben, Access TV, 9 pm, Thursday, October 24, 2013 (in Swedish). See the program.
New Ekonomistas post (in Swedish). Here is an English translation:
As is well known, the Riksbank justifies its tight monetary policy and resulting low inflation and high unemployment with the argument that the policy is needed in order to limit household debt and reduce debt growth. But the Riksbank itself, via the inflation rate, strongly affects real debt growth. By keeping inflation below target, the Riksbank actually significantly increases real debt and real debt growth. As we all know, one can debate whether household debt is a problem in Sweden or not. However, if there is debt problem, the Riksbank is making the problem worse by undershooting the inflation target. And regardless of whether or not there is a debt problem, the Riksbank is, with it s current policy, making the situation worse for Swedish borrowers and better for Swedish banks. Continue reading
Leaning-against-the-wind monetary policy may lead to a Fisherian debt deflation, since it may lower prices below the anticipated level and therefore raise real debt above what was anticipated. This is what the Riksbank has done by keeping average inflation significantly below the inflation target for a long period. This has caused household real debt to be substantially higher than it would have been if inflation had been on target. Link to Vox column.
New Ekonomistas post (in Swedish). Here is an English translation.
There is a lot of talk about housing prices in Sweden. As Jesper Hansson has noted in an Ekonomistas post recently (the post is in Swedish), the news becomes misleading if it reports housing-price growth that neglects the seasonal pattern and seasonal adjustment. It is also common to show graphs of nominal housing prices that give a misleading impression. Graphs of real housing prices and housing prices in relation to disposable income give a more balanced impression. Continue reading
Comments on Justin Y. Lin, Against the Consensus, SNS, October 7, 2013.