[English translation of Ekonomistas post.]
Vox column

In a new paper, ”Why Leaning Against the Wind is the Wrong Monetary Policy for Sweden,” which was presented at an NBER conference in Tokyo, June 20-21, I explain and summarize why leaning against the wind is the wrong monetary policy in Sweden.[1] According to the Riksbank’s own calculations, the benefit of this policy, in the form of lower risks from household debt, is completely insignificant compared to the cost in terms of higher unemployment and lower inflation. Since inflation has fallen much below the inflation target and households’ inflation expectations, the policy has instead actually increased households’ real debt burden and, if anything, increased any risks from the debt. Thereby, it has made more difficult the work of Finansinspektionens (FI, the Swedish FSA) to reduce any such risks.  Continue reading →

This is an English translation of an Ekonomistas post published on June 16, 2014.

During the week of June 2, 2014, Finansinspektionen (FI, the Swedish Financial Supervisory Authority) presented its report on financial stability, Stability in the Financial System, which is objective and balanced. During the same week, an IMF mission, as part of the regular Article IV consultation with member states, presented the mission’s Concluding Statement on the Swedish economy and economic policy. That statement is unfortunately partial and biased. The contrast between FI’s report and the mission’s statement could hardly be greater.  Continue reading →

[Ekonomistas post, in Swedish.]

In an op-ed in  Dagens Nyheter (English translation here), I argued that the democratic control of the Riksbank should be improved, since the Riksbank had neglected both fulfilling the inflation target and supporting the most important goal of Swedish economic policy, full employment. Among other things, I suggested that the Fiscal Policy Council should get additional resources and an expanded mandate to evaluate monetary policy. It may also be appropriate to move the new Fiscal and Monetary Policy Council to the Riksdag, the Swedish parliament. According to Bloomberg Finance Minister Anders Borg has now commented on the issue.  Continue reading →

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

In a speech at the meeting of the Swedish Economic Association (Nationalekonomiska föreningen) on May 28, 2014, Riksbank Governor Stefan Ingves suggested a compulsory amortization requirement and showed some calculations for such a requirement that, with a 50-year amortization period, would result in a reduction of a given household loan of 2 percent per year. Strangely enough, he avoided mentioning that the zero inflation Sweden has suffered the last few years, caused by the Riksbank’s leaning against the wind, has eliminated the automatic amortization of 2 percent per year that an inflation rate equal to the target of 2 percent otherwise would have caused.  Continue reading →