weakens when investors leave the swedish market for ones considered a safer investment. this was particularly noticeable during the mexico crisis of 1995 and the asia crisis of 1997 - 98. the recent unrest on the financial markets in connection with uncertainty over the global business climate has once again had a negative effect on the krona. following the terrorist attacks in the usa we saw a further depreciation of the krona ( and for some other minor currencies ), as well as a weak development in the stock market. finally, the generally stronger dollar must be mentioned as one of the explanations for the weak krona. some of the dollar's strength can be attributed to higher productivity in the usa, but most economists still believe the dollar to have been overvalued on the basis of traditional economic theory. the krona has thereby been steered to some extent by factors that are not connected with the economic situation and developments in the real economy. this means that the weak krona does not function fully as a shock absorber against the outside world. sweden has an undervalued currency despite our economy developing as well as other countries'economies. the monetary policy problem is that a weak krona risks creating inflation via import prices, which in turn can force a tighter monetary policy stance than would otherwise be necessary. there are international examples of how the exchange rate, instead of acting as a shock absorber, has rather worsened the effects of an economic slowdown. japan and switzerland have experienced prolonged crisis periods during the 1990s, while their currencies have remained very strong and have thus caused problems for the export industry. one effect of the weakening of the krona that we have now is that the export industry and the competitive import industry should become more competitive in the short term. however, there are some structural problems here : an unmotivated weak exchange rate risks strengthening certain parts of the export industry that do not constitute expansive future sectors. sweden's future hardly lies in competing with low costs and prices, but rather with quality, cutting edge technology and know - how. when the krona eventually appreciates to a level more motivated on the basis of fundamental factors, sweden will have an industrial structure poorly equipped to meet the requirements of the future. conclusions the riksbank assumes that the krona will appreciate. it is possible that we have already seen the beginning of this development very recently. when the upturn does take place, it may prove even stronger than the riksbank estimated in its latest

lars nyberg : the riksbank's cooperation with sida speech by mr lars nyberg, deputy governor of the sveriges riksbank, at a seminar arranged by sida, stockholm, 13 december 2006. * * * let me begin by thanking you for this opportunity to briefly describe the riksbank ’ s work on aid issues. i would also like to say that it is particularly pleasing to see that the nobel peace prize has this year been awarded to efforts in the financial sector in bangladesh. otherwise, the financial sector is often sadly forgotten in aid contexts. foreign aid to developing countries often concentrates on combating poverty in all its forms, which is of course commendable. but it is easy to forget that a financial sector with functioning institutions is necessary to achieve long - term stable economic growth. a high inflation rate in one country may, for instance, quickly lead to greater poverty among large sections of the population than even the best type of poverty combating measures have time to counteract. a wellfunctioning central bank and responsible monetary policy can therefore make a significant contribution with regard to combating poverty. the riksbank has cooperated with sida for some years now in building up and reinforcing capacity within the central banks of sri lanka, vietnam and uganda. we do not call this foreign aid, but quite simply “ staff exchange programmes ”. as all of the central banks in the world do more or less the same things, albeit in rather different ways, it is always rewarding to see how others work. we therefore send experts in various fields out to the countries with which we have this cooperation, for instance, experts who design payment systems or make models for inflation forecasting. the other central banks send their staff to us for further discussion of these issues or to talk about other things, such as how we deregulated the financial system in sweden in the 1980s, or how important information and transparency are if one is to run a central bank with independent responsibility for monetary policy. recently we have received some young employees who have stayed with us for periods of a month to six weeks on “ internships ”, where they can, for instance, learn how to write a financial stability report from scratch. long - term thinking is a central concept of our programme. it takes time to understand one another ’ s reality and to create relationships that lead to cooperation based on mutual trust. we usually say it takes at least five years. central bank governors