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

Managing credit bubbles

Alberto Martin, Jaume Ventura, 5 July 2014

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Credit markets play an increasingly central role in modern economies. Within the OECD, for instance, domestic credit has risen from 100% of GDP in 1970 to approximately 160% of GDP in 2012 (as measured by the Bank for International Settlements).

Topics: Financial markets, Macroeconomic policy
Tags: bubbles, collateral, credit, credit booms, financial accelerator, Leaning against the wind, lender of last resort

‘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

Monetary policy and excessive bank risk taking

Itai Agur, Maria Demertzis, 13 January 2011

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Disclaimer: The views expressed in this article are those of the authors only, and do not reflect the views of De Nederlandsche Bank or of its Board.

Topics: Monetary policy
Tags: financial stability, Leaning against the wind

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