Category Archives: Debate

Englund and Svensson reject Riksbank’s proposal for target variable and variation band

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 →

Remissvar på Riksbankens PM om “Byte av målvariabel och introduktion av variationsband”

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 →

IMF: Monetary policy should focus on price stability

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.

FT Alphaville post on Riksbank with many errors

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 →

New report: Penningpolitik och full sysselsättning (Monetary policy and full employment, in Swedish)

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 get different results?

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.)

The Riksbank cannot maintain financial stability by debating

“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 →