Op-Ed: The Swedish FSA’s amortization requirements lack demonstrable social benefits (English translation)

Op-ed in Dagens Nyheter, November 9, 2019, English translation: The amortization requirements and other credit tightening by Finansinspektionen (FI, the Swedish Financial Supervisory Authority) have large individual and social costs, but according to research they have no demonstrable social benefits. It is irresponsible to push through a credit tightening that fails a cost-benefit analysis, write Robert Boije, Chief Economist, SBAB; Harry Flam, Professor Emeritus, Institute for International Economic Studies; John Hassler, Professor, Institute for International Economic Studies; and Lars E.O. Svensson, Affiliated Professor, Stockholm School of Economics.

Every economic-policy measure should pass a cost-benefit analysis. It should show that the benefits exceed the costs. The FI’s amortization requirements and the other credit tightening that it has achieved fails such an analysis. The credit tightening has obvious, large costs but no demonstrable benefits.
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DN Debatt: Finansinspektionens amorteringskrav saknar påvisbar samhällsnytta

Finansinspektionens amorteringskrav och övriga kreditåtstramning har stora individuella och samhälleliga kostnader, men enligt forskningen ingen påvisbar samhällsnytta. Det är ansvarslöst att driva igenom en åtstramning som inte klarar en nyttokostnadsanalys, skriver Robert Boije, Harry Flam, John Hassler och Lars E.O. Svensson på DN Debatt.

Amorteringskraven: Felaktiga grunder, negativa effekter och minskad motståndskraft

“Amorteringskraven: Felaktiga grunder, negativa effekter och minskad motståndskraft”, presentation på seminariet “Överdrifter, missförstånd och rena felaktigheter,” Stockholms Handelskammare, 25 september 2019. Bilder powerpoint pdf

Ekonomistas post: The conclusion that the amortization requirements have been introduced for mistaken reasons holds also after Statistics Sweden’s revision of the household saving rates

“The conclusion that the amortization requirements have been introduced for mistaken reasons holds also after Statistic Sweden’s revision of the household saving rates,” Ekonomistas post, September 23, 2019 (Swedish).

Comments on Mertens and Williams, “Tying Down the Anchor: Monetary Policy Rules and the Lower Bound on Interest Rates”

“Comments on Merten and Williams, ‘Tying Down the Anchor: Monetary Policy Rules and the Lower Bound on Interest Rates’,” given at the SNB Research Conference, Zurich, September 20–21, 2019. Slides.

Almedalen 2019 – The Swedish FSA’s amortization requirements: Mistaken reasons, negative effects, and reduced resilience

“The Swedish FSA’s amortization requirements: Mistaken reasons, negative effects, and reduced resilience,” presentation at Almedalen, Visby, July 2019 (Swedish).

Almedalen 2019 – Amorteringskraven: Felaktiga grunder, negativa effekter och minskad motståndskraft

“Amorteringskraven: Felaktiga grunder, negativa effekter och minskad motståndskraft”, presentation vid ett seminarium i Almedalen 2 juli 2019. Bilder powerpoint pdf. Video.

Finansinspektionen har de senaste åren infört amorteringskrav och genomdrivit en övrig åtstramning på bolånemarknaden. Detta har skett på felaktiga grunder, har negativa välfärds- och fördelningseffekter och försämrar bolånemarknadens funktionssätt. Syftet har varit att öka bolånetagarnas motståndskraft och minska risken för djupare lågkonjunkturer, men i själva verket minskar amorteringskraven motståndskraften och snarast ökar risken för djupare lågkonjunkturer.

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Reply on Dagens Nyheter Debatt: The Swedish FSA draws the wrong conclusions

“The Swedish FSA draws the wrong conclusions,” reply to op-ed on Dagens Nyheter Debatt, June 17 (Swedish).

Replik på DN Debatt: Finansinspektionen drar fel slutsatser

Replik publicerad på DN Debatt 17/6:

Riskerna med hushållens skulder har överdrivits. Utländska erfarenheter beskrivs på ett missvisande sätt. Amorteringskraven har införts på felaktiga grunder. De drabbar nya bolånetagare utan hög inkomst eller förmögenhet, särskilt unga. De minskar också hushållens motståndskraft mot inkomststörningar. Continue reading →

Monetary Policy Strategies for the Federal Reserve

“Monetary Policy Strategies for the Federal Reserve,” International Journal of Central Banking 16 (February 2020) 133-193. Paper.

A previous version was prepared for the conference Monetary Policy Strategy, Tools, and Communication Practices—A Fed Listens Event, Federal Reserve Bank of Chicago, June 4–5, 2019. Video (my presentation starts 3 min 5 sec into the session).

Abstract

The paper finds that the general monetary policy strategy of “forecast targeting” is more suitable for fulfilling the Federal Reserve’s dual mandate of maximum employment and price stability than following a Taylor-type rule. Forecast targeting can be used for any of the more specific strategies of annual-inflation targeting, price-level targeting, temporary price-level targeting, average-inflation targeting, and nominal-GDP targeting. The specific strategies are examined and evaluated according to how well they may fulfill the dual mandate, considering the possibilities of a binding effective lower bound for the federal funds rate and a flatter Phillips curve. Nominal-GDP targeting is equivalent to a single mandate and is found to be inconsistent with the dual mandate. Average-inflation targeting is found to have some advantages over the others.

The FSA’s amortization requirements: Should they be abolished? Swedish Radio

“The FSA’s amortization requirements: Should they be abolished?“, discussion on Swedish Radio with Mikael Kulle and Henric Braconier (Chief Economist at the Swedish FSA), May 29, 2019 (Swedish).