. and of course it works both ways – monetary policy has significance for financial stability, not least through its impact on the banks and on economic activity. for instance, in an economic downturn the number of bankruptcies in the economy increases and so do the banks ’ loan losses. a hiccup in the financial machinery in sweden the market for the shortest interest rate in the economy, the overnight rate, has functioned more or less normally, with the interest rate close to the repo rate. so far so good. but internal distrust and uncertainty within the global system, particularly since midseptember, has made financial market participants reluctant to take risks and to lend money to one another at longer durations. it has become expensive and difficult to find funding, even for the swedish banks who are “ in good shape ” and have good capital adequacy. it has been particularly difficult to borrow at slightly longer durations. the banks normally have what may be called financing risk. when they lend money to individuals and companies it is often on long - term contracts. this means that the bank finds it difficult to get its money back earlier if it needs it. the banks receive money deposits on a short term but they lend out money more long term ; this is also expressed as deposits being liquid while loans are illiquid. as the functioning of the financial markets has deteriorated, the banks have been forced to refinance at shorter and shorter maturities, often only overnight. this has increased the banks ’ financing risk. the fact that they have been forced to finance themselves at shorter durations has in itself increased the uncertainty over which banks can manage their financing, and this has contributed to even greater anxiety and a lack of confidence. when fewer and fewer market participants are willing to expose themselves to risk the banks ’ access to credit declines. this in turn reduces the possibilities for households and companies to borrow money. this type of development can ultimately lead to a credit crunch. interest rates on longer - term loans between the banks ; interbank rates, have been much higher than normal. the demand for safe assets, such as treasury bills, has been very high at the same time as the demand for mortgage bonds and high - risk assets has been very weak. many interest rates, for instance, households ’ mortgage rates, have risen much more than would normally be motivated by the riksbank ’ s interest rate and forecasts of the future development of the repo rate. this means in practice that

; it may even be required for a good and sustained development of employment and growth, as is illustrated by how the federal reserve has acted in the united states. this shows what a forward - looking monetary policy can do for sustained growth. the formulation of monetary policy in the united states, with timely restrictive measures, has contributed to the american economy now being in its longest post - war period of growth. during rapid economic expansion, problems with bottlenecks may occur temporarily because new production facilities are not always available just when they are needed to cope with increased demand. experience in the 1990s suggests, however, that firms have become more flexible, both in the utilisation of existing capital stocks and in the procurement of new technology, machinery and plant when demand rises. this suggests that, if anything, it is not the level of unutilised capital resources that is critical at present. instead, an analysis of resource utilisation should probably focus on the labour market. another reason for this is that in a price analysis at macro level, the weightiest item in costs is wages ; total wage costs are equivalent to over two - thirds of gdp. the level of unemployment has been reduced but remains high, particularly compared with the post - war period up to the early 1990s. seen from that angle, some might say that the swedish economy has plenty of unutilised resources. experience from other european countries has taught us, however, that after a severe shock, as happened in the early 1990s, unemployment tends to stick at a high level, at least for a while. estimates of the equilibrium level of unemployment in sweden suggest that it moved up in the early 1990s and in terms of registered unemployment is somewhere in the interval 4. 5 to 7. 5 %. considering that the rate of registered unemployment is currently inside this interval, the estimates would suggest that the swedish economy is now close to full capacity utilisation. estimates of equilibrium unemployment are uncertain, however, and it is important that the riksbank ’ s monetary policy does not unnecessarily hamper decreased unemployment. all the other information about labour market tendencies has to be considered as well. a deeper analysis is needed as a foundation for any conclusions that the economy is approaching full capacity utilisation. when an economy is moving closer to its capacity ceiling, certain statistical phenomena can be expected to occur more clearly and frequently. the same applies to anecdotal information in such a situation. this can take the form of,