“Housing Prices, Household Debt, and Macroeconomic Risk: Problems of Macroprudential Policy I,” December 2019. Paper.
This paper answers three questions about current Swedish housing prices and household debt: (1) Are housing prices too high? (2) Is household debt too high? (3) Does household debt pose an “elevated macroeconomic risk”? Finansinspektionen (the Swedish FSA) has argued that the answers to these questions are all yes and that this has justified a substantial further tightening of already rather tight lending standards, achieved through mandatory amortization requirements and in other ways. This paper argues that the answers to the questions instead are all no, in the following sense: Regarding questions (1) and (2), there is no evidence that housing prices and household debt are higher than what is consistent with their fundamental determinants. Regarding question (3), the “macroeconomic risk” refers to the risk of a larger fall in household consumption in a recession or crisis. There is indeed evidence from Denmark, the UK, and the US of a correlation between households’ pre-crisis indebtedness and subsequent negative consumption responses during the financial crisis 2008-2009. But there is no evidence that high household indebtedness caused a subsequent larger negative consumption response. The correlation is instead explained by an underlying common factor that caused both high pre-crisis indebtedness and a large negative consumption response during the crisis. For Denmark and the UK, the evidence is that the common factor is debt-financed household overconsumption relative to income, more precisely overconsumption financed by housing equity withdrawals. There is also evidence of debt-financed overconsumption for the US. But there is no evidence of debt-financed overconsumption of any macroeconomic significance in Sweden. Therefore, there is no evidence of Swedish household debt posing an elevated macroeconomic risk. In summary, Finansinspektionen’s tightening of lending standards lacks scientific support.
“A natural experiment of premature policy normalization and of the neo-Fisherian view,” panel presentation at the ECB Conference on Monetary Policy: Bridging Science and Practice, October 29-30, 2018, Frankfurt.
Slides pdf powerpoint
“Can monetary policy still deliver? A natural experiment,” panel discussion at the 4th Oxford-Federal Reserve Bank of New York Monetary Policy Conference, Trinity College, Oxford, September 27-28, 2018. Slides pdf powerpoint
“Monetary Policy and Fiscal Policy in a Nash Equilibrium,” panel contribution in the panel “Interaction between Monetary and Fiscal Policies under Inflation Targeting” at the Annual NBU-NBP Research Conference, “Interaction of Fiscal and Monetary Policies,” Kyiv, Ukraine, May 31-June 1, 2018. Slides.
“The Future of Monetary Policy and Macroprudential Policy,” in ECB (2018), The Future of Central Banking, Festschrift in honour of Vitor Constancio, December 2018, European Central Bank, pp. 69-123. Paper. Slides.
Panel participation in seminar on Flexible Inflation Targeting at the IMF Spring Meeting, April 18, 2018, with Greg IP, Wall Street Journal as moderater; Tobias Adrian, IMF; Ilan Goldfajn, Central Bank of Brazil; Zdenek Tumame, previously at the Czech National Bank; Ksenia Yudaev, Central Bank of Russia; and me. My contribution are at the times 22:10, 44:50, and 48:45 in the video.
“Monetary Policy and Macroprudential Policy: Different and Separate?” Canadian Journal of Economics (2018) 51(3) 802-827. Paper. Published article.
The paper discusses how monetary and macroprudential policies can be distinguished, how appropriate goals for the two policies can be determined, whether the policies are best conducted separately or coordinately and by the same or different authorities, and how they can be coordinated when desired. The institutional frameworks in Canada, Sweden, and the UK are briefly compared. The Swedish example of monetary policy strongly “leaning against the wind” and the consecutive policy turnaround is summarized, as well as what estimates have been found of the costs and benefits of leaning against the wind. Continue reading
“Hur amorteringskraven drabbar unga som vill köpa en etta II: ‘Flertalet omfattas inte’ eller ‘alla drabbas’?” (“How amortization requirements hurt young buyers of studios II: ‘Most not affected’ or ‘all hurt’?” in Swedish), Ekonomistas post, February 20, 2018.
“Hur amorteringskraven drabbar unga som vill köpa en etta I” (“How amortization requirements hurts young buyers of studios,” in Swedish), Ekonomistas post, February 19, 2018.
Interview in Dagens Industri, February 21, 2018.
“Amorteringskraven ökar obalanserna på bostadsmarknaden” (“Amortization requirements increase housing-market imbalances,” in Swedish), Ekonomistas post.
Studiosamtal mellan Stefan Attefall och mig om kreditrestriktioner och svenskarnas skuldsättning, Bostadspolitik.se (in Swedish). Continue reading
“Amortization Requirements Benefit Well-Off and Hurt Liquidity-Constrained Housing Buyers,” February 2018. Paper. Ekonomistas post (Swedish) Continue reading