Calculations carried out by the central bank of Sweden, published in its December 1999 Inflation Report, show effects comparable to those demonstrated in the English report. It is not uncommon for the effects of economic instruments to be uncertain. On the contrary. This means that we cannot fine-tune economic developments. The possibilities for conducting a successful economic policy increase by proceeding gradually when economic developments require changes in the interest rate. Despite the uncertainty as to the speed and magnitude of the effect of changes in interest rates on inflation, there can be no doubt that higher interest rates lead to a reduction in price inflation. Almost all the analyses referred to above are based on economic models which have been quantified using historical data, as have Norges Bank’s calculations. The models cover some of the channels for interest rate effects, but not all of them. There is evidence to suggest that changes in interest rates may now have a greater impact on the economy, and more swiftly, in Norway and in other countries than was formerly the case. 1  OECD (1999): EMU. Facts, challenges and policies, chapter 2, OECD, Guiso, Luigi, Anil K Kashyap, Fabio Panetta & Daniele Terlizzese (1999): “Will a common European monetary policy have asymmetric effects?”, Federal Reserve Bank of Chicago, Economic Perspectives, 4th quarter. 2  Bank of England (1999): “The transmission mechanism of monetary policy”, The Monetary Policy Committee, Bank of England.
The trend towards net exports of long-term capital, as seen in the table, and the tentative explanations that have been provided may shed some light on why the effective krone exchange rate has been relatively weak for the last few years, despite large current account surpluses and short-term interest rates on a par with or higher than in other countries. Thank you for your attention. BIS Review 67/2000  14