The Riksbank's policy rate and average lending rates from monetary financial institutions to households and companies, new agreements, all interest-fixation periods. Sources: Statistics Sweden and the Riksbank. Unclear whether the Riksbank's purchases contributed to the krona remaining weak One of the motives behind the Riksbank's acquisition of assets was to avoid the krona strengthening in a situation where inflation was already too low. In that case, inflation would have been pushed down by lower import prices and the demand for Swedish export products would have fallen. This would have brought down economic activity, which would have further dampened inflationary pressures. Since other central banks also had large purchase programmes, the Riksbank's intention was precisely to avoid the krona becoming too strong, not to weaken it.16 It is hardly possible to say with precision how the Riksbank's acquisition of assets affected the exchange rate. The analysis is complicated by, among other things, the fact that the Riksbank published decisions on the asset purchases at the same time as decisions on the policy rate.17 One indication that the purchases had the intended effect is that the krona did not strengthen but weakened, despite the fact that the ECB's monetary policy became increasingly expansionary through both interest rate cuts and extensive asset purchases. However, it is difficult to see any clear evidence that the effect arose as a result of the Riksbank's purchases, for example by foreign investments being crowded out of the Swedish market during this period.
Their study suggests that the American  purchases of government securities did not affect the term structure and did not press down rates on other securities. 10 This interpretation is also in line with the Riksbank's communicated assessment that it would be possible to cut the policy rate to lower levels (see, for example, the Riksbank, 2016). 5 [30]  market, and the even lower rate on short government securities, which also led to a fall in the rate on longer-term government securities. Figure 3. Government bonds and covered bonds against expected policy rate Basis points  Note. Differential between rate on each bond and expected policy rate. Refers to bonds with a maturity of 5 years and an expected policy rate of 5 years ahead. Footnote 7 explains how the expected policy rate is calculated. Sources: Bloomberg, Macrobond, Refinitiv and the Riksbank. A relevant question is whether the Riksbank could have achieved the same effect by cutting the policy rate to −0.80 per cent instead of buying government bonds. I am unsure of the answer, but suspect that the effects would then have been different. Perhaps a lower policy rate had more clearly affected lending rates and also pressured the banks' profitability, but had similar effects on the exchange rate, something I will come back to in a moment.11 I also suspect that the Riksbank would have found it more difficult to communicate an even more negative policy rate.