krugman says sweden probably has a bubble but his former colleague disagrees

Experts at odds over housing bubble question

4:14 min

Nobel laureate in economics Paul Krugman told newspaper Svenska Dagbladet recently that based solely on the fact that "prices have gone up a lot and that household debt is quite high", Sweden is probably showing the symptoms of a housing bubble.

His claim prompted a response from his former colleague Lars E.O. Svensson.

The former deputy governor of the Swedish Central Bank and an economics professor himself, Svensson told Radio Sweden he disagrees that Sweden has a housing bubble.

"If you look at the facts since 2007, prices have increased only a little in real terms and they have actually fallen relative to disposable income. So that doesn't look like a bubble," says Svensson.

Krugman told SvD that over the last few years, "all the places where people said oh this is different, it's turned out that no, actually it wasn't. So, just on that general thing, I'd say probably it's a bubble."

However, Svensson insists that Sweden's case is different from other countries which have proven to have housing bubbles. "Typically, you've had a lot of speculation, a lot of construction, very little savings..." he says, whereas in his view, Sweden has the opposite situation.