The effective exchange rate index measures how the currency relates to a basket of other currencies that are weighted in terms of their relative importance to trade. The real index is also adjusted for relative differences in the CPI. A downward movement in the figure entails a strengthening of the exchange rate. Source: Reuters EcoWin  This put some emerging economies with a floating exchange rate in an awkward position as they did not want to lose too much competitiveness in relation to China while at the same time large capital inflows tended to strengthen their exchange rates. The G20 has now agreed that in certain situations it may be justified to introduce temporary capital regulations to protect against volatile capital flows. The view is that in normal cases a country should use monetary or fiscal policy, or tools for macro prudential supervision, but that in exceptional cases it may be appropriate to introduce measures to control capital. Work is underway to set up common guidelines. 15 Why does Sweden have such a large current account surplus? Prior to the crisis of the 1990s, it was usual for Sweden to have current account deficits for long periods of time (see Figure 4). After the crisis the krona weakened substantially at the same time as the deficit became a surplus. Since then, Sweden has not only had a surplus, it has had a very substantial and, to a certain extent, a growing surplus.
Second, because both climate change and financial instability may threaten our ability to deliver on this primary mandate, we shall take their consequences into account, but with full credibility and transparency in our  Page 9 sur 9 models and actions/tools. Third, we should take care to avoid overpromising, as there is no world in which central banks alone can address those issues, starting with the absolute necessity of an adequate carbon price. Central banks have increased capacities, but they still have limits. This is a piece of wisdom we must never forget. A standard Phillips curve approach provides a simple narrative of the path of euro area inflation over the last 20 years. Let me describe you briefly the exercise: HICP inflation is regressed on (i) a variable of economic slack, (ii) oil prices in euros, (iii) the prices of agricultural commodities in euros, and (iv) a lagged term of inflation measuring its inertia. In two separate specifications, the economic slack variable is (i) the output gap estimated by the European Commission, or (ii) the unemployment rate (ILO concept). The equations are estimated on quarterly data ranging from 1998 to 2019. For more details on reduced-form Phillips curve models used at the Banque de France, see Chatelais, De Gaye and Kalantzis (2015) “Low inflation in the euro area: import prices and domestic slack », Rue de la Banque 6, and Berson, De Charsonville, Diev, Faubert, Ferrara, Guilloux-Nefussy, Kalantzis, Lalliard, Matheron and Mogliani (2018) “Does the Phillips curve still exist?”, Rue de la Banque 56.