Chapters authored
Business Cycles, Money and Risk - Some New Implications for Economic Policy
A striking feature of the pandemics was the massive fiscal policy stimulus that was initiated globally and the reaction of households. Before a vaccine against Covid was invented, households reacted by saving a big part of their incomes, resulting in falling real consumption. When the vaccine was invented and expected to be rolled out, the reaction among households was the opposite: a big rebound in consumption driven primarily by spending saved funds on top of the increase in income. Household expenditure growth has tracked real wage growth this decade. Countries with wage constraint and high inflation were found to fare worse economically. The higher interest rates 2022–2023 in the wake of rising inflation have not given rise to the widely expected recession. It is concluded that fiscal, monetary and macro prudential policy have not been overly efficient during the first four years of the 2020s. It is found that other factors than policy are more powerful in affecting economic activity. The exception is the efficiency of monetary policy to control financial cycles, exemplified by the Swedish real estate boom-and-bust cycle of the past decade. Monetary policy it is concluded needs to set the policy rate close to real economic growth.
Part of the book: Economic Recessions - Navigating Economies in a Volatile World and the Path for Economic Resilience and Development [Working title]