In other words, the Riksbank would not just keep inflation low and stable, but also help to solve the unemployment problem. Today, it is generally accepted that a central bank cannot lastingly increase growth and employment by conducting a systematically expansionary monetary policy. A risk with a statutory, numerical dual mandate is also that politically uncomfortable reforms, that actually could lastingly increase employment, are not implemented on the grounds that employment is the Riksbank’s responsibility. The dual mandate would in this case do more harm than good. The evaluations made of the Riksbank on behalf of the Riksdag have so far argued against the introduction of an explicit, numerical employment target for monetary policy. At the same time, it has been taken for granted that the policy should be flexible insofar as it, in addition to the inflation target, should also try to stabilise fluctuations in employment. 27 The current arrangement with an inflation target and other reasoning in the preparatory works feel about right for me. Greater consensus on consideration for financial stability Another issue is whether flexible inflation targeting should also include taking the degree of financial stability into consideration. 28 This issue has sometimes been perceived as very controversial, but I think I see greater consensus among experts. I think it is obvious that there are close links between monetary policy and financial stability. The degree of financial stability affects how monetary policy measures spread to inflation and employment (the socalled transmission mechanism).

This was followed with the establishment of other institutions, which included the Securities Commission and the domestic rating agencies. The Bank also put in place a comprehensive and modern depository, delivery and settlement system to facilitate the issuance, trading and settlement of debt securities in the market. Mechanisms to increase liquidity in the market to enhance the overall price discovery process were also introduced through the provision of updated market information. In addition, measures were also introduced to release the captive holdings and to facilitate the efficient borrowing and lending of securities. More flexible foreign exchange policies was also implemented to facilitate capital raising and investment by non-residents to further accelerate the development of our domestic bond market. Today, the Malaysian bond market is the largest in the ASEAN region, accounting for nearly 90 percent of our gross domestic product. Corporations now have access to more innovative and sophisticated financing solutions through the bond market to meet their diverse funding requirements. Financing through the bond market by the corporate sector now accounts for 58 percent of their total financing compared to 33 percent prior to the Asian financial crisis, when there was greater reliance on the banking system for financing. With the advent of new financing instruments and supporting infrastructure, trading activity in the secondary market have also increased by more than three fold, with the trading volume now amounting to RM516 billion. A key development of the Malaysian financial market is the enormous growth of the sukuk market.