APRIL 28, 2014
To the Editor:
Re “Sweden Turns Japanese” (column, April 21):
We object to Paul Krugman’s claim that as a consequence of monetary policy mistakes, Sweden has been caught in a spiral of stagnation and deflation and thus “turned itself into Japan.”
Swedish gross domestic product growth in the aftermath of the crisis has been strong, increasing 1.5 percent during 2013 (and by 3.1 percent in the fourth quarter). Paired with a continuing increase in employment, this can, in our view, hardly be described as a stagnating economy.
Inflation is low, certainly, as it is in many countries at the moment. However, we see no signs of households postponing consumption, as in Japan. On the contrary, despite the weak growth in the euro area, which has contributed negatively to Swedish exports, private consumption in Sweden has developed well.
But, of course, the risks with continued low inflation should be taken seriously. It actually motivated the Riksbank’s cut in its repo rate — the rate at which the central bank lends to commercial banks — to 0.75 percent in December.
Stockholm, April 24, 2014
The writers are, respectively, chairman and vice chairman of the General Council of the Sveriges Riksbank, Sweden’s central bank.”