us? it is equally mixed. some economists have found evidence that increased national banking concentration does not lead to more instability. 20 they argue that banking concentration measures are not a good proxy for the degree of competition in banking markets when controlling for regulatory and other variables related to the contestability of markets. more recent work shows that more competitive banking systems are less prone to systemic crises. 21 at the same time, the growth of larger institutions as a result of consolidation may also lead to “ too big to fail ” dilemmas. 22 some research for the united states finds that return correlations between the the recent studies by guiso, sapienza and zingales ( 2005 ) and bertrand, schoar and thesmar ( forthcoming ) provide some evidence in this direction. see federal deposit insurance corporation ( 1997 ) and curry and shibut ( 2000 ). the number of federally insured thrift institutions declined by about 50 % from 3, 234 to 1, 645 over the period 1986 - 1995. by the end of 1995, the crisis had cost the us taxpayers usd 124 billion. see carletti and hartmann ( 2003 ). see allen and gale ( 2004 ). this is because each bank reacts strategically as its own individual actions affect the price of liquidity. a bank can avoid its own bankruptcy and contagion by providing adequate liquidity to the market. see northcott ( 2004 ). another recent paper by boyd and de nicolo ( 2005 ) models both deposit and loan markets as a contracting problem as opposed to just modelling one side of the banks balance sheet. the finding from this model suggests that banks may rather become more risky as markets become more concentrated. beck et al. ( 2005 ). schaeck et al. ( 2006 ). de nicolo and kwast ( 2002 ). securities prices of large us institutions have risen over time, which can be interpreted as reflecting increased systemic risk owing in part to consolidation. however, these correlations are time - varying and other factors may also have been important in driving them. the presence of a trade - off is dependent on the modelling approach used and the empirical method and time period considered. although this is a very brief review, it is reasonable to say that no concrete policy conclusions can yet be drawn from the academic literature on the relationship between efficiency and stability. even if the nexus between the two concepts still requires further theoretical and empirical study, public policy is confronted – already here and now – with real, practical

long - term base for good economic development. in addition, we will then be able to have real wage increases again. firms set their prices according to, for instance, the costs they incur, the behaviour of their competitors and expectations of future price and cost increases. when inflation is 4 / 10 bis - central bankers'speeches high and cost increases are large, firms are more eager to raise their prices often and to pass on the increased costs to customers. it is also easier to raise prices, as competitors do the same. we saw an example of this in the riksbank's business survey last autumn, where more than two out of three companies responded that they were now raising their sales prices more often than normal and that this is mainly because costs are rising all the time. in turn, the price increases affect other companies'input costs, raising expectations of future cost increases for which they want to compensate with higher prices – and so on. companies'labour costs are also affected if wage increases are pushed up by demands for compensation for the high inflation. another problem is that if inflation is high, it varies more over time than if it remains at a low level. this makes it more difficult for households and companies to plan and make financial decisions and it leads to a poorer functioning of the economy as a whole. in such an environment, it becomes more difficult, for example, to interpret the cause of price increases on individual goods and services. is the price increase a sign of a general price increase in the economy, or has the price of the product actually increased more than other similar goods? the risk is that consumers become hardened in the long run and accept all price increases as part of inflation, making it easier for companies to keep raising prices. it is therefore important to remain active and compare prices. a credible 2 per cent inflation target acts as an anchor thus, when inflation is high, there are self - reinforcing mechanisms that allow our expectations to adjust and this contributes to keeping inflation high. but an environment with low inflation can also become self - reinforcing in a similar way. firms are then more likely to let temporary price and cost increases reduce their margins rather than pass them on to customers. the effects on other firms'prices and costs will then be smaller. businesses and households recognise that inflation remains low and adjust their expectations accordingly. this means people do not need to worry or even think about inflation in their everyday financial decisions. an inflation target of 2 per cent creates