and presenting its views of the risks in the financial system. ever since the bank crisis at the beginning of the 1990s, this has been perceived as a very important task in sweden ; in fact, it could be argued that the bank crisis was allowed to arise partly because no authority previously had the specific task of monitoring the overall financial stability. the riksbank now publishes a twice - yearly report analysing the stability of the swedish financial system. in a crisis situation, the central bank plays a very important role. it may then need to go in and act as lender of last resort, that is, to grant emergency liquidity assistance ( ela ) to banks and financial companies if this is considered necessary to prevent the financial system from collapsing. the two objectives of price stability and financial stability are related to each other in different ways, in addition to both being important components of an efficient payment system. the stability of the financial system is of course a necessary condition for a policy aimed at price stability, as the latter is fairly meaningless if the country is threatened with economic collapse. the financial stability objective can therefore in one sense be said to be superior to the objective of price stability. at the same time, it is very probable that price stability in the long run promotes financial stability, for instance, by making the price system function better and thereby reducing the risk of bad investments. however, price stability is no guarantee of stability in the financial system, which is illustrated, for instance, by the problems in the japanese banks at the beginning of the 1990s. there is thus no reason for central banks to focus solely on the price stability objective and thereby assume that financial stability will follow automatically – both objectives are important. other objectives than price stability and financial stability? are there any other objectives than price stability and financial stability that may be suitable for a modern central bank? many countries also have objectives for developments in the real economy written into the regulatory framework governing the central bank ’ s activities. for instance, in the us legislation it says that the federal reserve shall promote “ maximum employment ”, while the british legislation says that the bank of england shall support “ the economic policy of her majesty ’ s government, including its objectives for growth and employment ”. in sweden there is no specific objective for real economic developments written into the law, but it is nevertheless considered to be understood that the see, for instance, oosterloo, s. and j. de haan, ( 2003 ), ” a

the 1970s. the value of independence how can one then construct a framework for monetary policy that provides the central bank with the best possible conditions to carry out its tasks? here i intend to be fairly brief as this is something that will be discussed in more detail in the next contribution to this conference. let me just note that there is currently general agreement that the central bank should be given the opportunity to work independent of the political system in order to attain the objective of price stability. it has been observed that if monetary policy is conducted at arm ’ s length from party politics, there is greater confidence in the price stability objective. this is linked to the fact that there has often been a tendency for politicians to use monetary policy for more short - term purposes which have conflicted with the long - term price stability objective and which have often entailed loosening the nominal anchor. making the central bank independent is probably the element of the past decades ’ monetary reform process that has triggered the most debate and has been perceived as the most controversial. it is probably natural for politicians to feel uncomfortable giving the central bank increased independence as it unavoidably means that they give up some of their decision - making powers, and moreover in a field perceived to be central. i assume that this is one explanation why, for instance, it took sweden until 1999 before there was sufficient political support to grant the riksbank increased formal independence and to confirm by law the price stability objective, despite the fact that these reforms had been proposed when the inflation target was introduced in 1993. however, the concern among politicians over making central banks independent is quite unwarranted. the independence does not, of course, mean that the central bank is free to conduct any monetary policy they wish ; it only means that it should be able to use the means at its disposal to meet the objectives set by the political system without outside intervention. this is usually expressed as the central bank being instrument independent but not goal independent. the delegation of powers should be regarded as a means for politicians to ensure that the long - term aim of the monetary policy that they endeavour to achieve – but have difficulty guaranteeing – can become a reality. furthermore, a natural consequence of the independence is that the central bank shall be accountable for its actions and that monetary policy shall be conducted in a transparent manner 7. it is interesting to note that, despite fairly substantial initial doubts, people have afterwards been very satisfied with the reforms implemented. monetary policy therefore appears to have essentially delivered