Albeit many people today acknowledge that the traditional kind of regulations do not produce the desired results, we tend to keep them too long. Let me give you an example. In Sweden, we had foreign exchange controls in place until 1989. Even though it was obvious that the controls were easy to circumvent and quite inefficient, the authorities were worried by what might happen if they were 1  BIS Review 66/2000  abolished. Perhaps there would be a huge capital drain? Hundreds of pages were written in attempts to map the consequences, but no comfort was provided this way. Eventually the central bank decided to go ahead in spite of the remaining uncertainty. To some surprise and some disappointment, nothing particular happened in the market. The move had been anticipated and the controls inefficient enough to allow the capital flows to adjust prior to the move. Credit controls and interest rate regulation had been abolished in Sweden four years earlier, in 1985, again probably far too late. Some people argue that the banking crisis we had in the early nineties might have been much less severe if the banking system had been forced into a competitive environment by deregulation a decade earlier. Keeping regulations too long is a danger, getting rid of them too quickly is another. This may sound peculiar, but let me again give you an illustration. When, in 1985, credit controls were abolished in Sweden, they had been in operation for more than forty years.
19 This was one of the reasons behind my reservation against the purchase decision in February 2015, see my comments at the monetary policy meeting (Riksbank 2015, p. 4-8 and 23-24). 9 [30]  Figure 6. The market already expected lower policy rates than the Riksbank Per cent  Note. Solid lines refers to outcomes. The red broken line refers to the market pricing just before the monetary policy meeting in February 2015, the blue broken line refers to the Riksbank's forecast in the Monetary Policy Report in February 2015. Source: The Riksbank. In Sweden, the signalling instead seems to have functioned in a completely different way. During 2013 and 2014, it became increasingly common for various agents in the Swedish debate to question whether the Riksbank placed sufficient emphasis on bringing inflation up to the 2 per cent target. But the combination of asset purchases and negative policy rate seemed very powerful. In 2015, the picture of the Riksbank's priorities therefore changed rapidly. There was no longer any doubt that the Riksbank was prepared to use all possible means to safeguard the credibility of the inflation target. It has probably been clear from my earlier statements that I have some doubts about whether the purchases of government bonds significantly stimulated the Swedish economy and thereby contributed to raising inflation. But I think this signalling effect was important, and more important than I realised when we started the purchases.