The Riksbank is wrong about the debt: Higher policy rates increase rather than decrease the household-debt ratio

Lars E.O. Svensson, 4 September 2013

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In the last few years, the Riksbank has conducted a monetary policy that has led to substantially lower inflation than the inflation target and unnecessarily high unemployment.

Topics: Monetary policy
Tags: household debt, Riksbank, Sweden

Why leaning against the wind is the wrong monetary policy for Sweden

Lars E.O. Svensson, 5 July 2014

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There is a lively ongoing debate about whether raising interest rates beyond the level needed to stabilise prices – ‘leaning against the wind’ – is a justified modification of flexible inflation targeting (as discussed in Smets 2013). In a new paper, I explain why leaning against the wind is the wrong monetary policy for Sweden (Svensson 2014).

Topics: Monetary policy
Tags: lean vs clean, Leaning against the wind, Riksbank

‘Leaning against the wind’, debt deflation, and the Riksbank

Lars E.O. Svensson, 10 October 2013

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A dangerous thing concerning debt is what Irving Fisher (1933) called ”debt deflation.” It is usually described as deflation causing the real value of nominal debt to increase. Loan-to-value and loan-to-income ratios also increase, since the debt is fixed in nominal terms but the nominal value of assets and income fall.

Topics: Monetary policy
Tags: debt deflation, Leaning against the wind, Riksbank

Is the Riksbank neglecting the price-stability objective, counteracting full employment, and increasing household debt?

Lars E.O. Svensson, 9 September 2013

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How do we know whether or not the Riksbank is neglecting the price-stability objective? Could it be that the Riksbank is not only neglecting the price-stability objective but is also counteracting the Riksdag’s and the Government’s full-employment objective as well as increasing household indebtedness?

Topics: Monetary policy
Tags: inflation targeting, Riksbank

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