, better their lives and hence, contribute to the progress of society at large. for the purpose of encouraging development of small and medium - sized enterprises, the government has so far provided private entrepreneurs with access under favourable terms to two apex global loans of the european investment bank in the amount of eur 65 million, two credit lines worth eur 63. 25 million from the government of the republic of italy, and the ear revolving credit fund in the amount eur 15 million. everything else, from coming up with a good idea, developing a good project to successful business realization, the entrepreneurs have had to do by themselves. it is encouraging that an increasing number of people is willing to take the leap into the waters of big small business and that the media is willing to provide coverage.

. being forced to confront one ’ s observations and assessments with a rule of action has in my opinion helped to focus the riksbank ’ s thinking in these matters. when the time comes to make a decision, it is of course a question of balancing the different risks. 5. should the risks of financial instability be taken into account? the riksbank is responsible by law for sweden ’ s payment system, which means we have to oversee financial stability and take it into account in our policy. but as i touched on earlier, financial imbalances also affect the general economy indirectly. an extensive academic literature in this field has grown up in recent years. the financial sector ’ s role in the national economy is becoming increasingly important. and as financial markets are now global, the horizon has to be widened. this was evident from the asian crisis. it is reasonable to assume that stable prices reduce the risk of financial imbalances. with lower inflation, economic agents are less likely to misinterpret prices and make imprudent investments. the wave of property speculation in the 1980s was occasioned in part by the misleading signals which the high - inflation economy transmitted. a favourable economic trend that is accompanied by a strong expansion of credit which people use in the hope of getting a quick return, is liable to generate financial bubbles. over the years there has been clear evidence of this in connection with excessively high expectations in the stock market or the property market, for example. in the end, it becomes difficult to justify prices in terms of economic fundamentals. elements of this have been apparent in recent years, for instance in the united states. one issue is whether central banks ought to consider asset prices when setting the interest rate. the notion here is that asset prices may influence the path of inflation. an increase in household wealth on account of rising share prices, for example, is likely to affect consumption and thereby demand in general and the price trend. effects from expectations are also involved. rising share prices may mirror expectations of permanently higher corporate profits and lead to expectations of higher lifetime incomes. if confidence in the future becomes much stronger in this way, the effects on demand may be considerable. share price increases may perhaps affect the corporate investment propensity in a similar way. the riksbank takes this into account as far as possible in the inflation assessment. but much remains to be done, theoretically as well as empirically, when it comes to understanding the nature of these relationships. a lively discussion