prices. house prices vary in response to changing economic conditions, one of them being the stance of monetary policy. in sweden, as in many other countries, house prices have increased in an environment characterized by strong macroeconomic conditions, rising disposable incomes and increasingly sophisticated financial markets. in this environment it is impossible to pin - point an appropriate rate of change in house prices. but policy makers always have to take decisions under a high degree of uncertainty. concluding remarks in conclusion, let me say that we have tried to be open and honest about the uncertainties surrounding the effects of house price developments on the rest of the economy and the appropriate monetary policy response. we have, in fact, been open about our own uncertainties and the differences in opinion, albeit small, that have arisen at times. this may have given rise to “ confusion about the confusion ”. but one could also say this comes with transparency – outside observers were very aware of the discussions that were being held and the uncertainties involved. inflation targeting so far has proved to be a successful way of conducting monetary policy, but there are unresolved issues and one concerns the treatment of house and other asset prices ; it has been hard to formally fit asset price developments into the frameworks researchers and central banks use when they study inflation targeting. the models currently available to us and other policy makers, while indispensable as tools for organizing our thoughts concerning difficult matters, are incomplete representations of complex economies and cannot be the sole input into our analysis. thus, while the academic community and researchers at central banks – including sveriges riksbank – continue their efforts to formulate models that combine firm founding in economic theory with good empirical properties, policy makers have to use judgement and take into account those relationships that history and experience suggest are of importance. in my view it is well worth keeping an eye on house prices and other asset prices and passing judgement on the risks that their developments may give rise to. if the probability of very negative outcomes can be reduced ex ante i believe this to be a good thing and a better solution compared to picking up the pieces ex post.

reserve bank has therefore taken the initiative to introduce a major reform to the national payments, clearing and settlement system. in april 1998, a new integrated system will be introduced to provide for real - time on - line settlement on a gross basis of large transactions, and for a daily netting - process and final settlement of smaller transactions. the intention with this major reform project is to reduce the risk exposure of possible default by any individual institution that could lead to the collapse of the whole system. at the same time, the new system must be compatible with global network systems for payments and clearing operations, and must provide a framework for an integrated cross - border settlement system for the sadc region. 2. 6 the gradual removal of exchange controls at the centre of the south african programme for financial reform is the gradual phasing - out of exchange controls. comprehensive exchange controls were introduced in south africa over an extended period of time, ranging from 1961 to 1993. these direct control measures were intended to provide some protection to the domestic economy against the adverse effects of non - economic factors that afflicted south africa over a long period of time. when the government of national unity came into power in april 1994, it was accepted as a policy objective to remove the exchange controls. at that time, however, south africa had virtually no official foreign reserves at its disposal for this purpose. the pragmatic solution was therefore adopted to embark on a process of a gradual phasing - out of the exchange controls. good progress has been made over the past three years with this programme. so far all effective exchange controls on current account transactions have been lifted ; exchange controls applicable to non - residents have been fully removed ; the two - tier exchange rate system for certain capital account transactions was formally terminated in 1995 ; south african resident corporates were given permission to make certain direct investments in branches and subsidiaries in foreign countries ; south african resident institutional investors ( insurers, pension funds and mutual funds ) may now diversify up to 10 per cent of the total assets managed by them in foreign currency denominated assets ; and south african resident private individuals will shortly be allowed to transfer limited amounts of capital from south africa for foreign investment. the removal of the exchange controls is a process that has far - reaching effects for the financial sector and the development of the financial markets in south africa. it is a process that must be applied with caution, and must be supported by other macroeconomic policy measures aimed at improving the international competitiveness of the