result of growth in domestic demand, supported by fiscal and monetary policies, rather than of growth in demand from trading partners outside the region. to illustrate the point, for each of the countries in the region, exhibit 4 shows industrial production ( the solid blue bars ) and exports ( the striped red bars ) measured relative to the pre - crisis peak. 9 you can see that the blue bars are generally taller than the red bars, indicating that, except for new zealand and hong kong, industrial production has rebounded by more than exports. indeed, industrial production in china, india, and indonesia has already reached new highs, and it is within about 5 percent of its previous peak in australia and korea. we would expect to see this pattern if growth in domestic demand, rather than growth in exports, was the predominant driver of increases in domestic production. 10 the revival of demand in asia has, in turn, aided global economic growth. despite the initial successes of asian economic policies, risks remain. as in the advanced economies, unwinding the stimulative policies introduced during the crisis will require careful judgment. policymakers will have to balance the risks of withdrawing policy support too early, which might cut short a nascent recovery, against the risks of leaving expansionary policies the data are quarterly through the second quarter of 2009. exports are measured in u. s. dollars. in principle, some rebuilding of inventories for export could also be boosting production, but such inventory data for the region that are available do not strongly support this view. in place for too long, which could overheat the economy or worsen longer - term fiscal imbalances. in asia, as in the rest of the world, the provision of adequate short - term stimulus must not be allowed to detract from longer - term goals, such as the amelioration of excessive global imbalances or ongoing structural reforms to increase productivity and support balanced and sustainable growth. lessons from crises and medium - term challenges for now, asian countries look to be weathering the current storm. in part, their successful responses reflect the lessons learned during the asian financial crisis of the 1990s, including the need for sound macroeconomic fundamentals. one crucial lesson from both that crisis and the recent one is that financial institutions must be carefully regulated, transparent, and sufficiently well capitalized and liquid to withstand large shocks. in part because of the reforms put in place after the crisis of the 1990s, along with improved macroeconomic policies, asian

funding – historically, foreign investors have proved to be “ volatile ”. indirect effects may then arise on the macro economy in that the banks ’ lending declines, which subdues demand. a combination of all of these effects may mean that the consequences for the economy are serious, if there is a decline in the housing market. so how much should we worry about this? the riksbank ’ s inquiry into the risks in the swedish housing market, which was published in spring 2011, showed that the high house prices in sweden can largely be explained by high incomes, low real interest rates and a low rate of construction. the low rate of construction, particularly in metropolitan regions, is something i consider to be a growing problem. at the same time, our inquiry noted that the fact that there are explanations for the high house prices in sweden does not offer a guarantee against future price falls. the trend of increasing debt among households, combined with a large share of mortgages at variable rates, may also have meant that households ’ sensitivity to fluctuations in house prices and interest rates has increased over time. several international studies imply that a high level of debt in itself can aggravate the negative effects of a fall in house prices on consumption. 2 since we published the inquiry into the risks in the swedish housing market, house prices have levelled off, and household debt has increased at a slower rate. it is important to remember that this development is probably partly explained by the monetary policy conducted ; for instance, the repo rate was raised in connection with the strong recovery after the financial crisis, and as i mentioned, we have taken into account the risks linked to household debt in our repo - rate decisions over the past year. another possible reason for the slower developments is the mortgage cap, to which i will return later. as household debt in sweden is still high, and higher than in many of the countries that have suffered major problems, i still consider the risks to be substantial ( see figure 5 ). see, for instance, sveriges riksbank ( 2011 ), the riksbank ’ s inquiry into risks in the swedish housing market. see, for instance, imf ( 2012 ), world economic outlook, april, and also r. glick and k. j. lancing ( 2010 ), “ global household leverage, house prices, and consumption ”, federal reserve bank of san francisco economic letter 1. for an interesting comparison of different geographical areas in the united states, see