##ised economies in the west. the direct real economic effects via foreign trade will probably be relatively small. for economic activity and inflation in sweden, the effects that could arise from decreased general confidence are more important. share prices in sweden have gone on falling since the september report was published, wiping out not just the gains during 1998 but also a part of last year ’ s increase. since the high in july, the stockholm exchange1 has dropped nearly 30 per cent, giving a fall of about 8 per cent from the level at the beginning of the year. since the inflation report was published, share prices have fallen nearly 6 per cent. affarsvarlden ’ s general index. - 6continued unrest and falling asset values would affect the behaviour of firms and consumers. if households and firms postpone investment and consumption decisions, economic activity will be lower. some signs of this can be discerned ; the latest figures suggest a minor blow to households ’ expectations of sweden ’ s economy, though this has not yet affected their personal economic expectations. there has been some fall in the growth of business credits. another channel for effects on the real economy is the banking system. a more cautious supply of bank credits could dampen economic activity. in this respect the international turbulence gives cause for concern. the tendency in the late summer for investors to move to assets that were regarded as generally secure - a flight to quality - has developed into a general aversion to holding risk, with investors fleeing instead to assets that are more liquid. the economic fundamentals in particular countries are currently playing little part in investment decisions. this has hit some third world countries very hard. the financial system in sweden is monitored very closely by the riksbank. the available statistics suggest that, compared with many international banks, swedish banks are in a better position, with lower exposures to countries hit by the crisis. the picture also seems to be relatively good as regards exposures to hedge funds. this low exposure is probably a consequence of the bank crisis in sweden in the early 1990s. so the risk of a domestically generated credit crunch should be small. weak currency besides increased uncertainty and greater risks of weaker economic activity, developments since the september report was written have involved downward pressure on the swedish krona. since september 28th the krona has weakened almost 2 per cent in terms of the tcw - index, while since the depreciation began last may the exchange rate has fallen about 9 per cent. just as on previous

assessment of how they work to promote a sustainable climate. indicators of this could be, for instance, their greenhouse gas emissions. this is how we are now beginning to give consideration to sustainability in our new risk and investment policy. we will not invest in assets issued by issuers with a large climate footprint when we are choosing other assets than those best corresponding to our policy need. this has some consequences for the holdings in our foreign exchange reserves. the riksbank has invested around 8 per cent of the foreign exchange reserves in australian and canadian central and federal government bonds, as they give relatively high yield and a good diversification of risk, at the same time as being traded on liquid markets. but australia and canada are countries that are not known for good climate work. greenhouse gas emissions per capita are among the highest in the world, but vary considerably between the different states. for instance, greenhouse gas intensity is more than three times higher in production in alberta than in ontario and quebec. as a result of the new investment policy, we sold our holdings of bonds issued by alberta in the spring. for the same reason, we have recently sold our holdings in bonds issued by the australian states of queensland and western australia. the riksbank needs to develop its work on how to take climate change into consideration in asset management. for instance, we need broader and deeper analysis of the issuers ’ climate footprint. at the same time, one must remember that the foreign exchange reserves are unavoidably dominated by us and german government bonds. the riksbank's contribution to a better development of the climate will therefore remain small. this is entirely natural. the important decisions on how climate change should be counteracted in sweden are political and should be taken by the government and the riksdag ( parliament ). 6 references bank for international settlements ( 2014 ), “ re - thinking the lender of last resort ”, bis papers no 79, monetary and economic department, september 2014. bartsch, elga, jean boivin, stanley fischer, philipp hildebrand ( 2019 ), “ dealing with the next downturn : from unconventional monetary policy to unprecedented policy coordination ”, macro and market perspectives, august 2019, blackrock investment institute. bernanke, ben s. ( 2016 ), “ what tools does the fed have left? part 3 : helicopter money ”, blog post, brookings. bernanke, ben s. ( 2019 ), “ monetary policy in a