- The need to keep monetary policy rates low to support an ailing economy, but at the same time, manage a boom in the housing market—that’s the scenario in which many policymakers around the world find themselves in. How should policymakers approach this type of scenario?
- Can monetary policy be used to manage problems associated with a housing boom?
- How can policymakers assess whether household debt poses a problem?
- So, if monetary policy is not suitable, how can any problems with household debt be handled?
“Inflation expectations: The Swedish experience,” presentation at the Inflation Expectations Symposium at the Federal Reserve Bank of Minneapolis, March 30, 2015.
Chair Janet Yellen on the recent Swedish experience of Riksbank policy tightening, in a speech at the conference “The New Normal for Monetary Policy,” Federal Reserve Bank of San Francisco, March 27, 2015:
The experience of Japan over the past 20 years, and Sweden more recently, demonstrates that a tightening of policy when the equilibrium real rate remains low can result in appreciable economic costs, delaying the attainment of a central bank’s price stability objective.
Discussion (slides) of the paper “Financial Stability and Optimal Interest-Rate Policy” by Andrea Ajello, Thomas Laubach, David López-Salido, and Taisuke Nakata, Federal Reserve Board, at the conference “The New Normal for Monetary Policy,” Federal Reserve Bank of San Francisco, March 27, 2015.
A later (and different) discussion of this paper is here.
Paul Krugman has a post on self-justifying Swedes.
In an interview in Bloomberg, Riksbank Deputy Governor Per Jansson again tries to defend the indefensible, the Riksbank’s sharp tightening of monetary policy in the summer of 2010. From the summer of 2010 to the summer of 2011, the Riksbank majority increased the policy rate from 0.25 percent to 2 percent. Continue reading
“Forecasting errors reveal Swedish Riksbank’s fall from grace,” Bloomberg, March 8, 2015.
Sweden’s central bank has gone from best to worst among its peers at forecasting inflation. Continue reading
In June 2009 I gave a speech at a conference at the Federal Reserve Board, Washington DC, and argued that the effective lower bound for the policy rate was not zero but negative, and not hard but soft. The speech was published in Journal of Money, Credit and Banking 2010.
“Low Inflation Calls for Patience in Normalizing Monetary Policy,” speech by Charles Evans, President of the Federal Reserve Bank of Chicago, on March 4, 2015.