##ridge. this referred to the phenomenon of high growth without any signs of overheating. later there was talk of a ‘ new economy ’ where investment in new technology and growing use of the internet were the primary factors behind a more efficient performance with rising productivity. firms that utilised the new technology functioned better and competition increased, partly because the internet made price comparisons easier, stocks could be slimmed and distribution became more efficient. in my view, however, the technical innovations are not the only explanation. the deregulations that began in the 1980s, as well as the consolidation of the federal budget during the 1990s, should also be mentioned as major factors. the deregulations have helped to strengthen america ’ s corporate sector and the improvement in the federal finances led to increased confidence among households and firms as well as somewhat lower long bond rates. low interest rates and higher productivity growth then paved the way for the massive wave of investment. the u. s. economy ’ s growth rate shot up and unemployment dropped to levels that hardly anyone believed could be combined with low, stable inflation. as outcomes proved earlier forecasts wrong, assessments of how strong demand ’ s long - term growth could be without generating rising inflation were adjusted gradually upwards. turning then to share prices in the united states, in the first place the nasdaq exchange with its predominance of high - tech companies, we can see that expectations of corporate profits rose rapidly to levels that had not been seen since the 1930s. the trend peaked last year with share prices at record levels and a gdp growth rate above five per cent, in some quarters even higher. the reverse side of the medal lies in the imbalances that have built up during this period. the united states has been living on borrowed money ; even though the federal budget was first consolidated and then generated a growing surplus, investment exceeded aggregate saving. investment was still able to reach record levels because the additional capital could be borrowed from investors abroad who willingly placed their money in u. s. securities in the expectation that the good times would continue. that explains why the u. s. current account has been able to run up a gigantic deficit, currently equivalent to almost 5 per cent of gdp, at the same time as the dollar has appreciated strongly. even with rapidly rising productivity, the rate of economic growth became incompatible with long - term stability. in order to dampen activity, the federal reserve started to apply the brakes in summer 1999, raising the instrumental rate in

too far from the target and if inflation expectations are firmly anchored. 1 however, macroprudential policy also has links to microprudential policy and fiscal policy. all these policy areas may need to be involved in order to curb systemic risks in the most effective way. what instrument to choose in a specific situation should depend on the problem at hand and the purpose of the policy action. the most effective tool may not always be in the hands of the macroprudential supervisor. finally, in the past few years, macroprudential tools have been developed to tackle risk stemming from the traditional banking sector. macroprudential policy has thus mainly been implemented as a form of banking regulation. as a consequence, resilience in that sector has increased. but, on the other hand, the non - banking sector is increasing rapidly and so, most likely, is risks related to it. this being my third and final issue, i think it is most important that we increase our understanding of these changing trends and the risks they entail, and that we start developing macroprudential instruments that can counteract these risks. in order not to fall behind the curve, work on developing new tools should start promptly, as it will take years before such instruments can be in place at national levels. see also skingsley, c., ( 2015 ), inflation - targeting policy after the financial crisis, speech at almega, stockholm 2015. bis central bankers ’ speeches