BIS central bankers’ speeches  13  Mishkin, Frederic S. (2007), Housing and the Monetary Transmission Mechanism. In Housing, Housing Finance and Monetary Policy, Jackson Hole Symposium Conference Proceedings, 359-413, Federal Reserve Bank of Kansas City. Mishkin, Frederic S. (2011), Monetary Policy Strategy: Lessons From the Crisis. NBER Working Paper Series, no. 16755. National Bureau of Economic Research. Norges Bank (2013), Monetary Policy Report with financial stability assessment. 1/13 March. Nyberg, Lars (2005), House price developments and monetary policy. Speech at Evli Bank, Stockholm, 19 December. Sveriges Riksbank. Nyberg, Lars (2011), Monetary policy and financial crises – some reflections. Speech at Danske Bank, Stockholm, 21 December. Sveriges Riksbank. Svensson, Lars E.O. (2012), Monetary policy, debt and unemployment. Speech at SNS, Stockholm 14 November, Sveriges Riksbank. Svensson, Lars E.O. (2013a), Monetary policy and employment: monetary policy is too tight. Speech at the Swedish Trade Union Confederation, LO, Stockholm 13 January, Sveriges Riksbank. Svensson, Lars E.O. (2013b), The Possible Unemployment Cost of Average Inflation below a Credible Target. Working Paper. www.larseosvensson.net. Svensson, Lars. E.O. (2013c), Reservation against the Account of monetary policy 2012. Appendix B to the minutes, Minutes of the Executive Board meeting on 19 March, Sveriges Riksbank. Swedish National Debt Office (2013), consultation response to SOU 2013:6 Att förebygga och hantera finansiella kriser (Preventing and managing financial crises) (only in Swedish) – part report from the Financial Crisis Committee. Söderström, Ulf and Vredin, Anders (2013), Inflation, Unemployment and Monetary Policy. Economic Commentaries No 1 2013, Sveriges Riksbank.

This is a strengthening compared to the earlier agreement among the euro area countries, changing the requirement from targeting the cyclically adjusted deficit to targeting an improvement in the structural deficit. When deciding the adjustment path, public investment and structural reforms can be taken into account. If structural reforms are to be taken into account, they should have a large and proven positive effect on the economy and there should be a safety margin to the 3% deficit floor. My view is that there is a possibility to use the newly defined MTOs in a wise manner, more closely adapted to the situation of the individual country. However, the scope for interpretation is so large that there is a high risk of lax and uneven implementation. The experiences of the first year indicate that some member states have more ambitious MTOs than required by the Pact. This is often countries with their own national budgetary rules, such as Sweden, which comprise MTOs. At the same time,  2  BIS Review 88/2006  there are other member states who need to do more to achieve their MTOs. The measures are often postponed too far ahead and are not sufficiently explicit and concrete. Changes in the corrective arm The third part of the changes refers to what happens when a country has an excessive deficit. As before, exemptions can be granted if the country is suffering from a severe economic downturn that it could not foresee, so called exceptional circumstances.