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1. Why has Swedish Inflation been Persistently Low?

Author:
Felix Hufner
Publication Date:
06-2007
Content Type:
Working Paper
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Average inflation in Sweden has been one of the lowest among European countries since the mid- 1990s. Three supply-side factors help to explain this phenomenon, all related in some sense to increased global integration. First, a shift towards imports from low-cost producing countries has resulted in falling import prices. Second, deregulation and increased product market competition with foreign companies entering the market has led to price falls in some sectors, notably in retailing. Third, wage growth has lagged productivity and kept unit labour costs down. This paper reviews these factors and analyzes the policy options for the central bank.
Topic:
Economics, Labor Issues, Monetary Policy, and Inflation
Political Geography:
Europe, Sweden, and Scandinavia

2. The Swedish Housing Market Better Allocation via Less Regulation

Author:
Felix Hufner and Jens Lundsgard
Publication Date:
06-2007
Content Type:
Working Paper
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
While several sectors in the economy have been deregulated, the Swedish housing market remains distorted, hindering an optimal matching of supply and demand. In the rental market the rent setting framework with its focus on cost-based rents in the public sector prevents a price response, leading to long queues in some regions and vacancies in others. Many Swedes that would have preferred otherwise are driven into the owner-occupied segment, where prices are increasing strongly, and rising above an estimated fundamental value. The supply of new dwellings is made more difficult by an uncompetitive construction industry, coupled with cumbersome planning regulations and few incentives for municipalities to issue more land. On the fiscal side, real estate taxes are below neutral levels, implying an indirect subsidy to housing. This paper presents a review of the recent steps to abolish real estate taxes and also proposes comprehensive reform of regulations in the rental housing sector.
Topic:
Reform, Regulation, Public Sector, and Housing
Political Geography:
Europe, Sweden, and Scandinavia