Lars E.O. Svensson, Saturday, July 5, 2014 - 00:00

Sweden has pursued a tighter monetary policy than is necessary to achieve the inflation target in order to reduce risks associated with household indebtedness. The net benefit to ‘leaning against the wind’ has been hotly debated; this column argues strongly against it. By reducing inflation, the Riksbank has in fact increased household debt, and contractionary pressure has worsened the employment situation. The author estimates that the benefits to leaning are worth only 0.4% of the costs.

CEPR Policy Research