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Macroprudential Policy and Household Debt: What is Wrong with Swedish Macroprudential Policy?

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  • Svensson, Lars E.O.

Abstract

Much is right with Swedish macroprudential policy. But regarding risks associated with household debt, the policy does not pass a cost-benefit test. The substantial credit tightening that Finansinspektionen (the FI, the Swedish Financial Supervisory Authority) has achieved – through amortization requirements and more indirect ways – has no demonstrable benefits but substantial costs. The FI - and the international organizations that have commented on risks associated with Swedish household debt - use a flawed theoretical framework for assessing macroeconomic risks from household debt. The tightening was undertaken for mistaken reasons. Several reforms are required for a better-functioning mortgage market. A reform of the governance of macroprudential policy – including a decision-making committee and improved accountability – may reduce risks of policy mistakes.

Suggested Citation

  • Svensson, Lars E.O., 2020. "Macroprudential Policy and Household Debt: What is Wrong with Swedish Macroprudential Policy?," CEPR Discussion Papers 14585, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14585
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    References listed on IDEAS

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    Cited by:

    1. Eduardo Levy Yeyati & Federico Sturzenegger, 2023. "A balance‐sheet approach to fiscal sustainability," Fiscal Studies, John Wiley & Sons, vol. 44(1), pages 61-84, March.
    2. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2007. "A Balance-Sheet Approach to Fiscal Sustainability," Working Paper Series rwp07-044, Harvard University, John F. Kennedy School of Government.
    3. Federico Sturzenegger & Nicolás Der Meguerditchian, 2022. "A Balance-Sheet Model of Fiscal Policy in Namibia," Working Papers 136, Red Nacional de Investigadores en Economía (RedNIE).

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    More about this item

    Keywords

    Macroprudential policy; Housing; Mortgages; Household debt; Macroeconomic risk;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G1 - Financial Economics - - General Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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