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

Lars Svensson

No 14585, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Macroprudential policy; Housing; Mortgages; Household debt; Macroeconomic risk (search for similar items in EconPapers)
JEL-codes: E21 G1 G21 G23 G28 R21 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-ure
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Citations: View citations in EconPapers (3)

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