It is precisely the increases in asset values and increased ability to borrow that stimulate the economy that are the proper concern of prudential regulation.” The hypothesis that there is a risk-taking channel for monetary policy is not undisputed, but it has become increasingly accepted and the empirical support for it is increasing (see, for instance, Altunbas et al., 2014 and Gungor and Sierra, 2014, for a couple of recent contributions). 6  BIS central bankers’ speeches  Let us be more concrete – some simple calculations So far, I have spoken about monetary policy and macroprudential policy in theoretical terms. Let me now go on to talk about them in more concrete terms with regard to resolute decisions. An obvious problem we need to deal with immediately is the high and increasing indebtedness in the Swedish household sector. On aggregate, household debt currently amounts to 174 per cent of their total income.16 However, this figure is based on all households, regardless of whether or not they have any loans. If we only include households that actually have loans, the figure is higher, 263 per cent, which is shown by data from the eight largest banks in Sweden gathered by the Riksbank. The same data show that the figure has risen to 313 per cent, if we only include households with mortgages. These figures give cause for concern, and should not just be allowed to continue growing; we will unfortunately need to deal with this situation in the foreseeable future.
The crisis gave rise to a new policy area – macroprudential policy – which partly works by influencing the volume of credit in the economy, in roughly the same way as monetary policy. To me, it is fairly obvious that these two policy areas need to interact. If monetary policy is to carry out its tasks well, then macroprudential policy must function properly and most likely also vice versa. The crisis also made necessary a monetary policy that was in many leading countries more expansionary than ever before, and which was conducted in ways not previously tested. Given this, the debate that has arisen on international monetary policy spillover effects is perhaps not particularly remarkable. We do not yet know what our final conclusions will be with regard to these two areas. These are a couple of the loose threads that I am not able to tie up here today. However, a certain amount of new thinking will probably be required, both with regard to monetary policy and financial supervision and the regulation of the financial markets – but also concrete  31  See Ostry and Ghosh (2013). 32  A further possibility that I will not take up here, but which has been tested in emerging markets in particular, is to use capital regulation. For a detailed and partly critical review of the efficiency of capital regulation, see Klein (2012). BIS central bankers’ speeches  15  measures.