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##balances have also put a burden on central government finances and increased uncertainty. this has in itself prolonged and intensified the crisis. japan is a well - known example of what can follow in the tracks of a serious financial crisis if confidence cannot be recreated in economic policy and future growth potential. the consequences of financial imbalances have proved particularly serious in countries with a fixed exchange rate, partly because interest rates need to be kept high when confidence in the fixed exchange rate policy declines, and partly because there has often been a large foreign currency debt. when the fixed exchange rate has to be abandoned and the country's own currency is weakened, the burden of debt increases. should the central bank then concern itself with asset prices? following the dramatic 1990s in the usa ( and sweden ), with soaring prices on shares and property, many people began to think that perhaps the central banks should keep an eye on asset prices and react to these, even if there were no sign of rising inflation. overrated share prices and / or property prices lead sooner or later to an adjustment in asset prices. if this adjustment is dramatic, the effect could be an economic downturn, with rising unemployment and a slowdown in prices. the extreme valuing of certain shares in the it and telecom sectors on the american stock exchange, nasdaq, should perhaps have warranted more stringent monetary policy a few years ago, according to the international debate on monetary policy. one argument put forward as to why the central banks should not merely look to forecasts regarding consumer prices when making decisions on monetary policy, but should also monitor the development of asset prices, is that ownership of shares is much more widespread now. thus, changes in asset prices probably have much greater significance for household expenditure now than they did before. deregulation, liberalisation and globalisation have increased the importance of the capital markets for economic developments and made them more volatile. assets with market prices now comprise a much greater share of households'balance sheets than before. this is thus claimed to be a good reason for monetary policy to take into account developments in asset prices. in the worst case, falls on the stock exchange that correct overvaluations can lead to financial instability, if share prices have been driven by pledged shares and if the market participants are in some cases unable to pay back their loans. this can result in panic sales, exaggerated falls in prices and credit institutes facing difficulties as a result of exposure to households and institutions that have become insolvent.