target is irrelevant and should be scrapped, we have, given our mandate, an obligation to bring this up to discussion and point out that we consider it to be a problem. when it comes 10 see, for instance, calmfors ( 2018 ) and calmfors et al. ( 2019 ). it should be pointed out that there are studies indicating a certain amount of wage flexibility with regard to changes in unemployment at a regional level, see carlsson et al. ( 2019 ). 11 down to it, sweden is not the only country with an inflation target of 2 per cent and an industrial sector exposed to international competition. important to have perspectives on the krona development let me now go over to the other area i wish to delve deeper into ; the exchange rate and development of the krona. when sweden introduced an inflation target in 1993, we chose an exchange - rate regime at the same time. as i just pointed out, a fixed exchange rate and an inflation target with a floating exchange rate are two different ways of trying to provide the economy with a nominal anchor, that is, a benchmark for price - setting and wage formation. an inflation target tries to steer expectations in the economy directly, while a fixed exchange rate tries to steer them indirectly, by virtue of it becoming more costly if price increases and wage growth are higher than abroad. as we have established, the latter disciplinary mechanism did not work well for sweden. so all that remained was to test an inflation target. my firm conviction is, as i have already touched upon, that the political system clearly supports the system with an inflation target of 2 per cent and a floating exchange rate, and my perception is that the same applies for a large majority of the swedish people. it is reasonable to assume that they therefore also expect the riksbank to do what it can to maintain confidence in the inflation target. it would be odd if the idea was for sweden to, on the one hand, have an inflation target but that, on the other hand, it was not so important for the target to be credible, nor for the riksbank to try to ensure that this was the case. if the view is that confidence in the inflation target is important, it follows, or at least should follow, that there is an acceptance that, when the riksbank conducts an expansionary policy to maintain confidence in the inflation target, the krona exchange rate will be affected. this occurs via the normal exchange - rate channel of

lars nyberg : some swedish experiences with financial stability surveillance speech by mr lars nyberg, deputy governor of sveriges riksbank, at the bank indonesia, jakarta, 10 december 2003. * * * introduction first of all i want to express my thanks to the bank of indonesia for inviting me to this conference. financial stability - or the lack of it - is a very topical subject in the light of events in the past decades. furthermore, financial stability issues seem to be strikingly similar between countries, whether they are big or small. it makes good sense, therefore, to have different central banks talk about their experiences. and, as always, the best experience comes from mistakes made. with this in mind, i shall tell you a little of how we in sweden look at stability surveillance today. first, some background. systemic stability came under serious threat during the swedish banking crisis at the beginning of the 1990s. as was later the case in indonesia, the risk of severe financial instability led to government intervention. a decision at very short notice was required of sweden ’ s government and parliament in the autumn of 1992 : should they choose to support swedish banks financially without really knowing how expensive the support might have to be, or should they risk a financial crisis with unforeseeable consequences for the swedish economy? the decision that was taken was the only reasonable option - to rescue the swedish banks. the government issued a general guarantee for the banks ’ liabilities and set up a special bank support authority to cope with the banks that were in serious difficulties. the government, explicitly supported by the opposition, acted just as vigorously and promptly as the situation required. but this did entail making a decision on the basis of insufficient information about the causes and depth of the crisis - that could have burdened the government budget with at least 10 billion us dollars. having to take such important decisions at short notice and without adequate information about the financial system is an experience we do not wish to repeat. the riksbank is accountable to the swedish parliament with regard to keeping a stable price level our inflation target - but also with regard to promoting financial stability and a safe and efficient payment system. after the crises there was room for some self - criticism in this respect. in practice, we had not supported our stability target with any systematic analytical work on overall stability. to address this, we started to build up knowledge and analytical capability in the field of stability. by publishing a financial stability report in 1997, we were among