The financial crisis 2008–2009 hit households in Sweden through a large fall in GDP, a rapid increase in unemployment and housing prices that fell by 10–20 per cent depending on which statistics you use (Figure 1). The euro crisis has recently entailed a new stress test. Swedish households and mortgage borrowers have also passed this test with flying colours. The Riksbank’s inquiry into the risks in the housing market also observed that resilience in the Swedish mortgage market was good. It estimated the effects on the economy of a fall in housing prices of 20 per cent and concluded that the effects would be relatively small, particularly if they are counteracted by a more expansionary monetary policy.19 One important indicator of sustainability and resilience is the household saving ratio. Swedish households’ saving ratio is now historically high, while it was very low prior to the 1990s crisis, minus 3 per cent at its lowest (Figure 2). A high saving ratio means that households are increasing their real and financial assets and that their consumption is not funded by loans. A low saving ratio and a loan-funded consumption boom, which was the case in Sweden prior to the 1990s crisis and in the United States prior to the most recent crisis, is on the other hand problematic and not sustainable.
For example, there may sometimes be a little too much focus on the potential antagonism and differences of opinion within the Board – and in the worst case on a person rather than a policy. But one positive effect that people perhaps do not think about is that topical and important issues, often those in the forefront of academic research, are quickly implemented in the Riksbank’s practical work. The fact that the Executive Board publicly debates what role the policy rate should play to influence household debt means that the Riksbank’s analysis apparatus is activated on this issue to a greater extent than would have been the case without this open discussion. Although I would not say that there are any more concrete results yet, there is definitely a lot of deliberation being put into this issue. I do not believe that this would have been the case – at least not to the same extent – if all of the Board members were agreed that the repo rate should be held slightly higher to subdue household debt. In other words, the open debate hopefully helps us to move forward in this field. References Armelius, Hanna and Hans Dillén, “The relation between household saving and falls in house prices”, Economic Commentary no. 4, 2011, Sveriges Riksbank. Assenmacher-Wesche, Katrin, and Stefan Gerlach (2010), “Monetary policy and financial imbalances: Facts and fiction”, Economic Policy 25, pp. 437–482.