In the minutes of the monetary policy meeting held in June 2010 (Sveriges Riksbank 2010), I show that a more expansionary monetary policy than is assumed in Claussen, Jonsson and Lagerwall (2011) can almost neutralise the effects on inflation and GDP of a fall in house prices, even taking into account the zero lower bound for the repo rate. 20  Armelius and Dillén (2011). BIS central bankers’ speeches  9  Another important difference between the current situation in Sweden and the situation in Sweden prior to the 1990s crisis and in the Baltic countries, Ireland, Portugal and Spain prior to the most recent crisis, is that the economies in the latter cases were clearly overheated with unsustainable growth and price and wage inflation. One can scarcely claim that the Swedish economy is overheated today or even that the construction and housing sectors are overheated. As I said, housing prices appear to have levelled off (Figure 1). Figure 4 Housing investment Per cent of GDP  Sources: Bureau of Economic Analysis, Central Statistics Office Ireland, Federal Statistical Office, Germany, National Statistics Institute, Spain and Statistics Sweden  So how is the lenders’, that is the banks’, resilience? A lack of financial strength in the banks created major problems in Sweden during the 1990s crisis and is also causing problems for several countries in Europe now.
Criteria for an Appropriate Future Interest Rate Path – A Practician’s Approach”, Staff Memo No. 2005/6, Norges Bank. Reinhart, Carmen M. and Kenneth S. Rogoff (2009), This Time is Different, Princeton University Press. Rogerson, Richard (1997), “Theory Ahead of Language in the Economics of Unemployment”, Journal of Economic Perspective 11 (Winter), pp. 73–92. Svensson, Lars E.O. (2010), “Why a lower repo-rate path?” speech held at Umeå University, 24 February 2010. Svensson, Lars E.O. (2011a), "For a better monetary policy: Focus on inflation and unemployment”, speech at Luleå University on 8 March 2011. Svensson, Lars E.O. (2011b), “Practical Monetary Policy, Examples from Sweden and the United States”, Brookings Papers on Economic Activity, Fall 2011, pp. 289–332. Svensson, Lars E.O. (2012a), “The Possible Unemployment Cost of Average Inflation below a Credible Target”, working paper, www.larseosvensson.net. Svensson, Lars E.O. (2012b), “Utmaningar för Riksbanken – penningpolitik och finansiell stabilitet,"(Challenges for the Riksbank – monetary policy and financial stability) Ekonomisk Debatt no. 5 2012, year 40, 17–29. Sveriges Riksbank (2010), “Minutes of the monetary policy meeting”, no. 3, 30 June 2010. Sveriges Riksbank (2011), The Riksbank's inquiry into risks in the Swedish housing market, www.riksbank.se. Sveriges Riksbank (2012a), “Minutes of the monetary policy meeting”, no. 3, 3 July 2012. Sveriges Riksbank (2012b), Monetary Policy Report, July 2012. Walentin, Karl, and Peter Sellin (2010), “Housing Collateral and the Monetary Transmission Mechanism”, Sveriges Riksbank Working Paper No. 239. BIS central bankers’ speeches  15