for small countries like sweden. freedom for savers to choose the country in which to save was also introduced in many countries. the obstacles to ideas, products, services and production factors moving freely across borders has declined further the importance of price and budget stability for productivity growth has been demonstrated, for instance, by william easterley in “ when is stabilisation expansionary ”, the world bank, dec 1995. during the 1990s, partly due to our eu membership and this ought to have had a positive effect on factor productivity. internationalisation has thus contributed to an increasingly large part of the corporate sector becoming exposed to competition. increased competition means that companies must become more efficient and cost - conscious, which in turn should have a positive effect on productivity. in addition, a new competition act was introduced in sweden in 1993, containing an express ban on anti - competitive cooperation between companies and a ban on abuse of a dominant position. there has also been some further deregulation. for instance, state monopolies have been abolished and freedom to establish new companies with regard to, for instance, transport, communications and energy has been introduced. changed competitive conditions thus affect productivity growth, but they can also affect price developments more directly. despite the fact that we gained much stiffer legislation on competition in 1993, developments in this field appear to be moving slowly. swedish prices remain higher than in other countries in several areas without explanations for this in the form of differences in vat rates and wage levels. increased competition can contribute to price levels converging, but this assumes that the relative price changes will be accepted and it can entail, as in the 1990s when electricity and telecommunications were deregulated, such large price reductions in some sectors that our inflation rate will be lower than that of other countries. special interests and consumer interests limits to competition are a clear example of how special interests dominate over general consumer interests. there are many examples of this in various areas of the swedish economy, and in particular the construction sector. this means that we allow inefficiency to remain, which reduces growth and the development of most people ’ s standard of living. one interesting and very recent example of how special interests have declined concerns pharmaceutical prices. a change in this field was introduced in october last year, which in principle means that pharmacies are obliged to exchange a drug in a prescription for a cheaper equivalent ( generic ) unless the customer is willing to pay the difference. the effect of this new regulation, combined with patents

participants, regulators and supervisors. unlike in evolution, the objective has been set. nevertheless, to achieve the desired goals, interactions with other policy areas as well as cross - border spillovers still have to be taken into account. as a consequence, market participants themselves will have to adapt, to comply with new regulatory requirements and to develop their own responses to a changing environment. some responses might turn out to be unnecessary for a healthy economy. but former fed chairman paul volcker was taking things to extremes when he said, “ the only useful banking innovation was the invention of the atm ”. other innovations, however, are beneficial to the development of our financial system, and those should be the ones that survive. the potential failure of the financial system can come with a huge price tag for society. for this very reason, a stable system is essential. macroprudential policy will have a key part to play in this, and national macroprudential responsibilities are about to be assigned in many countries. appropriate instruments now need to be developed and implemented ; we will have to “ walk the talk ”. this will be a major challenge for some time to come. thank you very much for your attention to the topic which is close to my heart. bis central bankers ’ speeches