conclusion. • another alternative is to base an exchange rate forecast on market pricing or other assessments of market expectations. this approach, which is used by a number of central banks, reduces but does not eliminate the risks associated with rapid fluctuations and speculation. another problem here is that the picture of expectations is liable to vary with how they are measured. on the other hand, this approach has the advantage of presumably being most credible in the eyes of market players ; it is, after all, based on their assessments! • the riksbank has chosen a third alternative, which is to make an independent assessment. here the initial position - the cut - off rate - is naturally one important component and so are the market ’ s expectations. in addition, we consider other relevant information that is available, not least the exchange rate that can be said to be more fundamentally reasonable. which of these three approaches is most appropriate - given that game situations and the risk of sudden shifts could be disregarded - is not self - evident. personally i cannot see why we should not treat the exchange rate in much the same way as other forecast variables. we normally try to consider all the relevant information that can be gathered on a particular variable. it seems reasonable to do so in this case, too. another matter is the considerable degree of uncertainty that surrounds virtually all forecast variables and particularly the exchange rate. that is why we also produce an assessment of risks. our policy is then based on an overall assessment, including a valuation of the various risks. exchange rate theories it is often said that for the conduct of economic policy, the best help in practice is a good theory. in the case of exchange rates, however, the relevant theories have not been particularly successful at either explaining or predicting movements of the swedish krona or other currencies in recent years. a basic difficulty with theories for determining exchange rates is the fact that an exchange rate is a nominal price, whereas economic analysis is constructed to explain relative prices. for that reason, exchange rate analysis tends to focus on real rates, which in principle are defined as the basket of goods a particular country has to provide in order to obtain a given basket from abroad. in such an expression for the real exchange rate, the numerator is usually written as the product of the nominal exchange rate and a suitable price index in foreign currency and the denominator as a suitable domestic price index. a common approach is that the real exchange rate is constant. the term equilibrium is used here to

be made, the choice of currencies, deliberations about counterparties and contacts with other central banks. in my view, it would not under normal circumstances be reasonable to publish this type of operative deliberation. that might prejudice the possibility of achieving the approved or envisaged goal. another question concerns the executive board ’ s position on the publication of minutes when the board ’ s discussion has more to do with matters of principle, including information about the views of individual members. this, too, is a complex issue because information of this type can also affect the effectiveness of the measures that are taken. one possibility i consider worth testing would be to wait for some months before the board evaluates the measures comprehensively and publishes more detailed minutes. this, in any event, is a matter to which the board intends to return later this autumn with the aim of establishing a procedure for preparing these matters and providing information about them in ways that are appropriate to the current exchange rate regime. at the same time, it should be underscored that the arrangements we lay down will not be set in concrete. there must be some latitude for unforeseen circumstances. it is worth mentioning that when the executive board came into being in january 1999 and chose to work with public minutes, the interval before they were published was comparatively long, 6 to 8 weeks. since then it has proved possible to reduce the lag to only a fortnight without giving rise to serious detrimental effects. conclusion the main message in my address today has been that in the current monetary policy regime the exchange rate ought to be regarded mainly as one of a number of forecast variables. the problem here is that, like other currencies, the swedish krona is difficult to forecast in the time perspective that is relevant for monetary policy, namely a couple of years ahead. the situation is complicated, moreover, in that the exchange rate is a variable that in certain situations monetary policy can conceivably affect directly. we try to use all the available information in order to arrive at our forecast. at the same time, the monetary policy decision is reached in the light of other, alternative paths for the exchange rate. in the course of the last three decades the krona has depreciated. the main causes have been sweden ’ s higher inflation and lower growth. since the realignment of sweden ’ s economic policy in the early 1990s, these factors no longer apply. the fact that, on average, the krona has