a measure. this is a reasonable requirement, but it is not always easy to fulfil. i can give a few examples. if the riksbank injects liquidity into the financial system in a situation where the supply of credit is threatened as the result of, for example, a pandemic, is this then a measure aimed at safeguarding the so - called monetary policy transmission mechanism, or is it intended to reduce the risk of shocks that could threaten financial stability? or if the krona exchange rate plummets and the riksbank intervenes to make purchases to support the krona, is the aim to counteract the risk of increased inflation, i. e. monetary policy, or is it to prevent shocks in the financial system, i. e. financial stability? the answer to the question in these examples is of course : both. our experience is that the measures the riksbank takes or considers taking often have both a monetary policy purpose and a financial stability purpose. while changes in the policy rate can be purely monetary policy, various forms of liquidity support or purchases of securities or currency can be both monetary policy and financial stability measures, especially in terms of their effects. the requirement of the riksbank act is that the riksbank must be able to state the main purpose of a measure ; whether the intervention has primarily a monetary policy or a financial stability purpose. in our communication, we will then also describe what effects a measure can be expected to have in other areas. the act is a little too detailed a somewhat larger problem is that the new riksbank act prescribes which tools may be used for monetary policy and financial stability respectively, despite the in addition to credit motivated by monetary policy and general liquidity assistance for financial stability purposes, the riksbank is also able to provide emergency liquidity assistance under certain conditions pursuant to chapter 3, section 7 of the riksbank act. in this case, special loan conditions apply. 3 tools – providing credit, entering into repo agreements and buying / selling financial instruments – overlapping the two areas. in several respects, the act goes too far in prescribing in detail the conditions under which, and how, the riksbank may use certain tools. so why are these legal rules problematic? well, in both monetary policy and financial stability, it is essential that the riksbank has a high level of preparedness to act and considerable freedom to act within its area of responsibility

lars nyberg : financial disturbances and the real economy speech by mr lars nyberg, deputy governor of sveriges riksbank, to danske securities, stockholm, 11 march 2002. * * * i would like to begin by thanking you for the invitation to come here to danske securities and speak to you, who are at the real heart of the financial sector, but also heavily dependent on occurrences in the real economy. in my speech today i intend to concentrate mainly on the relationship between developments in the real economy and financial developments, as it has looked in the past and as it may look in the future. the riksbank's two objectives, maintaining price stability and promoting efficiency and stability in the payment system in a broader context, have both real economy and financial aspects. the objectives are more closely linked than might be thought initially. turbulence on the financial markets has repercussions for economic activity and developments in the real economy and thus great significance for the shaping of monetary policy. it is difficult, if not impossible, to pursue an effective monetary policy when the financial markets are functioning inefficiently. at the same time, price stability and stable, low inflation expectations help to create security and stability in the financial markets. this far it is quite simple. it is rather more difficult to make an in - depth survey and understand the relationship between the financial and the real economies. moreover, developments in the financial markets are very rapid and there is every reason to believe that the relationship changes over time. if one looks back at global developments over the past year, the financial markets appear to have coped with more and greater shocks than many would have thought possible. the it and telecom bubble burst, a simultaneous international slowdown in economic activity began, turkey experienced a financial crisis, the usa suffered terrorist attacks on 11 september and began a war against afghanistan and the american energy company, enron, collapsed. finally, argentina suffered a severe crisis. the private market operators were not saved by further measures from the imf, as many had expected. however, not even all of these events together appear to have had any serious long - term effects on the global financial markets. in addition, it now seems as though the repercussions for the real economy were relatively slight, despite the fact that households and companies, particularly in the usa, were heavily indebted when the economic upturn began. does this mean that we can now write down the risk of financial imbalances