to restore credibility. among other things, restoring confidence involves being transparent about the problems and about the measures for dealing with them. it also means that measures are implemented as stated by the responsible authorities, without any deviations in timing or application. just the suspicion that specific industries or other interest groups may be receiving unjustifiably favourable treatment would quickly erode any confidence. 2. transparency is important. a severe crisis wipes confidence out - rightly so. we realised that it was up to sweden to regain it. to do so, all the cards had to be on the table. the extent of the losses and the magnitude of the bad loans had to be revealed in their entirety and valuation had to be prudent. if you hide losses initially or are overly optimistic in valuations, you risk having to apply again to the international investment community or to taxpayers for additional support. this, in my view, might jeopardise confidence and legitimacy. it is also necessary to have highly transparent and fair “ rules of the game ” for government support to the financial sector, not least to avoid political bickering. the responsibility for transparency falls primarily on two parties : the authorities and the banks. the authorities must be transparent about the broad framework for the solution of the crisis and the banks must be transparent about their losses and other deficiencies, financial position and need for external support. 3. someone must take the losses. it is important to realise that once the crisis has occurred, the losses cannot be hidden and must be dealt with in one way or another. in this respect swedish institutions worked well. party politics were clearly separated from business realities. and the politicians did a good job, realising that bygones were bygones, setting up a fair framework to sort the crisis out. from a political perspective it was important that the banks ’ owners were not rescued. people at large had to take substantial cuts in living standards - at least temporarily. letting the “ big guys ” go unhurt under these circumstances would have jeopardised the whole operation. 4. the macroeconomic policy mix for crisis management can differ. in our case, there was obviously not much room for fiscal stimulation of the economy. considering the much lower public debt, there could be more room in some asian countries but the potential budget effects of the financial losses also need to be taken into account. monetary policy has a difficult dual role : it has to strike a balance between stimulating the economy so as to

##bank and most other central banks becoming more open and clear. another important reason is that we have quite simply regarded it as a means of more easily achieving our objective and of making monetary policy more efficient. there are three main aspects i would like to emphasise in this context : • firstly, it will be easier to communicate that the interest rate decisions made are really aimed at achieving low and stable inflation. this provides greater credibility and helps to anchor expectations around the target. it was an important reason why the riksbank began to publish its inflation forecasts and other material on which decisions are based early on in the new inflation - targeting system. i do not believe that it would have been possible to build up confidence in the price stability target as quickly as we did if we had not been as open as we were regarding our work and our decisions. • secondly, openness and clarity are currently an important part of monetary policy in itself. you could say they are one of the tools in our toolbox. so what do i mean by this? there is a relationship between interest rates with different durations. and expectations of short - term interest rates, which the central bank governs, are important to the long - term interest rates. a central bank can therefore ” indirectly ” influence interest rates with longer durations by influencing expectations of shortterm interest rates. greater influence over interest - setting throughout the economy – the yield curve – makes the impact of monetary policy more effective. this is often called conducting monetary policy with the aid of “ management of expectations ”. and the best way to do this is to provide good information. • the third and final aspect is that increased openness and clarity “ outwards ” can contribute to our working more efficiently within the riksbank. this is a quite important argument. the more open we are, the easier it is for others to evaluate how well our monetary policy functions. this gives us an extra incentive to do a good job. what has the process towards openness and clarity resulted in? the path towards becoming more open and clear has not always been easy, it has at times caused some debate. two issues in particular have been the subject of lively discussion over the past year. the first is that we now publish our own forecasts for the interest rate path. the second concerns how representatives of the riksbank send signals regarding the interest rate in speeches and press releases. interest rate path a natural step towards openness in february 2007 we presented for the