Inflation Targeting and "Leaning against the Wind"

Lars Svensson

International Journal of Central Banking, 2014, vol. 10, issue 2, 103-114

Abstract: Should inflation targeting involve some leaning against the wind? Sweden provides a case study, since the Riksbank has been leaning against the wind since 2010, stating concerns about risks associated with the household debt-to-income ratio. The cost of this policy in terms of low inflation and high unemployment is high. According to the Riksbank’s own analysis, the policy rate effect on household indebtedness is very small, and any effect on risks associated with household debt is miniscule. Indeed, much lower inflation than expected has increased households’ debt burden and, if anything, increased such risks.

JEL-codes: E52 E58 G21 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (87)

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Journal Article: Inflation Targeting and "Leaning Against the Wind" (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2014:q:2:a:5

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