Consultation response to the Riksbank’s memorandum “Change of target variable and introduction of variation band”
Peter Englund and Lars E.O. Svensson, Stockholm School of Economics pdf Swedish Ekonomistas
The Riksbank’s proposal for a change of target variable and the introduction of a variation band is rejected. There is no urgent need for these changes now, and it is inappropriate to forestall the parliamentary committee that currently reviews the monetary policy framework, including the issue of the choice of target variables and a possible variation band. The proposal for introduction of a variation band is specifically rejected. It does not serve any purpose and can, in practice, create a significant ambiguity about the inflation target, result in less effective anchoring of inflation expectations, and make it more difficult both to evaluate the Riksbank’s target achievement and to hold the Riksbank accountable for fulfilling the monetary policy goals. Continue reading
Peter Englund och Lars E.O. Svensson, Handelshögskolan i Stockholm pdf English Ekonomistas
Riksbankens förslag om byte av målvariabel och introduktion av ett variationsband avstyrks. Det finns inte något akut behov av dessa förändringar nu och det är olämpligt att föregripa den parlamentariska kommitté som gör en översyn av det penningpolitiska ramverket som bl.a. innefattar valet av målvariabel och eventuellt variationsband. Förslaget om introduktion av ett variationsband avstyrks speciellt. Det fyller inte någon funktion och kan i praktiken skapa en betydande oklarhet om penningpolitikens mål, ge ett sämre ankare för inflationsförväntningarna samt försvåra såväl en utvärdering av måluppfyllelsen som ett ansvarsutkrävande av Riksbanken. Continue reading
Substantially revised and updated on May 15, 2016.
On Thursday, May 12, the Finance Committee of the Riksdag had a hearing on the review by Marvin Goodfriend and Mervyn King of Swedish monetary policy. I had the opportunity of asking some questions at the hearing. They were: Continue reading
“The deceptive debt ratio,” a report by Evidens scrutinizing the Riksbank’s assertions about the Swedish housing market, September 2015. English Swedish
Op-ed in Dagens Nyheter, September 26, 2015. Swedish only
Monetary policy should stick to its core mandate of price stability, and should deviate from its traditional role only if the benefits to the economy outweigh the costs, according to a new study from the International Monetary Fund, “Monetary Policy and Financial Stability.”
The question is whether monetary policy should be altered to contain financial stability risks. Should it lend a hand by temporarily raising interest rates more than warranted by price and output stability objectives?
Based on our current knowledge, and in present circumstances, the answer is generally no.
An interview of me by IMF Survey.
- Monetary policy is not suitable for managing housing booms and rising household debt
- Not all housing booms pose a problem
- Identifying problem cases requires deep and complex analysis
A speech, with several references to the Swedish experience, of John Williams, President of the Federal Reserve Bank of San Francisco, on May 27, 2015. Here is the part that refers to Sweden: Continue reading
Matthew Klein has published an FT Alphaville post with many errors, “Sweden’s inflation record is less interesting than you think.” Its main point is that “the harshest criticisms [of the Riksbank] seem to be unjustified” and that “A reevaluation of the Riksbank’s recent record looks to be in order.” But the post’s reasoning and conclusion do not stand up to scrutiny. Continue reading
My cost-benefit analysis of the Riksbank’s leaning against the wind 2010-2011 (estimated benefits are about 0.4 percent of the costs) has received some attention and is available on page 25-30 in this paper.
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
Peter Wolodarski, “Time for Stefan Ingves to hand over the baton” (“Dags för Stefan Ingves att lämna över stafettpinnen“, in Swedish), editorial in Dagens Nyheter, Februari 15, 2015.
Riksbankens mandat bör förtydligas, sysselsättningen ges större vikt, den demokratiska kontrollen av Riksbanken skärpas och koordineringen av penningpolitiken och makrotillsynen förbättras. Det skriver jag i den nya underlagsrapporten Penningpolitik och full sysselsättning för LOs projekt Full sysselsättning och solidarisk lönepolitik. Continue reading
Does a trivial econometric error explain why Andersson and Jonung (2014) get different estimates of a Swedish Phillips curve than the very robust estimates that I get in Svensson (2015)? Yes, their trivial error is not to have done the standard test for weak instruments when using regressions with instrumental variables. Their instruments soundly fail the standard Cragg-Donald F-test. Their instruments are weak and as a consequence it is their estimates of the Phillips curve that are unreliable, not mine. See this note.
(A previous response in English to their criticism is available here.)
“Riksbanken kan inte upprätthålla finansiell stabilitet genom att debattera” (in Swedish), 2nd reply to Carl B. Hamilton on di.se, the website of Dagens Industri. Also on Ekonomistas (in Swedish, with links).
Carl B. Hamilton seems to think that the Riksbank by op-eds, analyses and discussions in the new Financial Stability Council has sufficient instruments to affect financial stability to warrant financial stability as an objective. But the Council is only a forum for discussions and cannot make decisions. Since the Riksbank has no decision power over micro- and macroprudential instruments (that power is with Finansinspektionen, the Swedish FSA), the Riksbank cannot be accountable for financial stability and not have financial stability as an objective. Continue reading