vitas vasiliauskas : real estate taxation and macroprudential policy welcome remarks by mr vitas vasiliauskas, chairman of the board of the bank of lithuania, at the macroprudential policy conference " real estate taxation and macroprudential policy ", vilnius, 2 july 2019. * * * good morning, ladies and gentlemen : it is my pleasure to join you today at this already - traditional conference, and to thank you all – speakers, panellists and participants – for gathering to discuss this very timely topic. i would also like to express special thanks to our keynote speakers – professor klaas knot, president of de nederlandsche bank, and henrik braconier, chief economist at sweden ’ s finansinspektionen, who delivered the keynote speech yesterday. regretfully, i was not able to be here when you began discussing the interlinkages between real estate taxation and macroprudential policy instruments, and shared country experiences in residential real estate taxation. still, today ’ s agenda promises us another intensive day with engaging discussions and, hopefully, some helpful answers. dear colleagues : in welcoming you all today, i hardly need to list the benefits of macroprudential policy and its instruments. i am sure that macroprudential policy works – especially as a preventive tool. let ’ s take current lithuania as an example. the economy is growing, but we do not observe economic agents – creditors and borrowers – acting irresponsibly ( what we had prior to the financial crisis ). i believe that other countries experiences, the esrb framework and the policy instruments prove, if not the effectiveness, than at least their potential. it is worth noting that we still lack clear evidence on the interactions of various macroprudential measures with other policy areas. this is true, despite the fact that macroprudential policies have been gaining recognition and use among policymakers in many countries. in fact, data shows that the usage of macroprudential measures increased persistently in the immediate post - crisis years. this trend is evident in both advanced and emerging market economies, albeit to a different extent. in my opinion, measures directed at affecting crediting in the economy are effective tools with an impact on the economic cycle – especially in the low interest rate environment. we consider current timing to be appropriate to deepen our understanding of the links between macroprudential and other policies, as policy makers need to

credit boom, it is better to use other tools than monetary policy to influence indebtedness among households and developments on a specific market, such as the housing market. in the case of sweden, one can claim that the repo rate has for several years been set higher than is strictly justified by inflation and resource utilisation. 4 but household indebtedness was not explicitly mentioned as a reason until the repo - rate decision in october 2012. the repo rate had then been gradually cut from 2 per cent at the end of 2011 to 1. 25 per cent in september 2012. in october 2012, the repo rate was then held unchanged and household debt was for the first time treated as a factor in the monetary policy deliberations, both in the monetary policy report and the press release on the repo - rate decision. however, the repo rate was cut further, to 1 per cent in december 2012. it then remained at this level for one year, until december 2013, despite low inflation and an inflation forecast that had been revised down substantially, as well as unemployment that seemed stuck at around 8 per cent. in december 2013, the repo rate was cut further to 0. 75 per cent. during the period between december 2012 and december 2013, i felt that the consideration given to household indebtedness was preventing the further repo - rate cut that i considered justified. others also lean, but under different circumstances we in sweden are far from alone in feeling that rising indebtedness driven by rising house prices poses a threat to financial stability. other central banks have also given explicit consideration to such threats when formulating their monetary policy. of those countries that are comparable with sweden in the sense that they are developed economies with inflation targets, norway, canada, australia and new zealand are the ones that can be said to have conducted a monetary policy that to some extent leans against the wind. sweden does however stand out in that inflation has been clearly below the target in recent years, at the same time as unemployment has been relatively high. 5 policy update published in april 2013 states that the monetary policy conducted “ is expected to stimulate economic developments and inflation at the same time as taking into account the risks linked to households ’ high indebtedness ”. an article in the monetary policy report published in july 2013 presents a conceptual framework for taking into account financial imbalances in the monetary policy assessment. for a review and categorisation of various points of view