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).
Why leaning against the wind is the wrong monetary policy for Sweden
Lars E.O. Svensson, 5 July 2014
Managing credit bubbles
Alberto Martin, Jaume Ventura, 5 July 2014
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).
‘Leaning against the wind’, debt deflation, and the Riksbank
Lars E.O. Svensson, 10 October 2013
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.
Monetary policy and excessive bank risk taking
Itai Agur, Maria Demertzis, 13 January 2011
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.
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