This was the case after the emergence of the railway at the end of the 19th century and the crash of 1929 followed on from the breakthrough of electricity and the internal combustion engine at the beginning of the 20th century. I do not intend to make an in-depth analysis of the causes here, but to point out that even very promising developments in the growth of productivity can live up to the profit expectations created during speculative bubbles. Monetary policy implications It is evident that large, IT-driven and IT-supported structural changes are underway and that these affect productivity and price levels in a way that needs to be taken into account when assessing inflationary pressure in the economy. We do not know how long the technological changes will have an effect, but I have every reason to believe that IT will affect developments in Sweden for the next few years, which basically comprises the monetary policy target horizon. On the other hand, there is in my opinion nothing to indicate that the “new economy” has invalidated any fundamental economic connections. At the same time, rapid changes such as those we are now experiencing involve greater uncertainty. No one can say with any great precision how productivity will develop over the next few years and how large a role IT will play in its development. This uncertainty is enhanced by the difficulty in measuring the IT sector’s significance as a result of shortcomings in Swedish statistics.
This is particularly true for sovereign credits where there is BIS Review 50/2000  2  widespread support for finding an alternative to the current OECD/non-OECD distinction. In other words, OECD membership would no longer be relied on for setting regulatory capital for sovereign or bank claims. Notwithstanding this support, many commentators have offered modifications to the Committee’s proposed standardized framework, which several observers have suggested does not go far enough toward risk differentiation. The Committee has taken this concern to heart, and is actively evaluating whether it would be feasible to incorporate additional risk weights into the standardized approach, and, if so, how this should be done. As we work toward greater risk differentiation among claims that are rated, we will continue to give extensive thought to the treatment of unrated claims, given that the penetration of external ratings remains low in most countries. It is difficult to avoid creating incentives to remain unrated while at the same time retaining continuity with the existing Accord’s treatment for these credits. Further work would be needed to develop a standard for unrated claims that would be more risk-reflective but, unfortunately, few commentators offered significant suggestions in this regard. Procyclicality The Committee has considered what some observers have noted is the potential for introducing greater cyclicality in a more risk-sensitive capital framework. That is, the capital requirements for loans to troubled borrowers will tend to increase at just the point when such trouble is becoming apparent.