The situation today is thus similar, with countries around the world contemplating how best to conduct macroprudential policy. In some areas, particularly in some emerging markets, they already have some experience of what could be described as macroprudential policy. However, the results have been somewhat mixed and it is unclear what lessons can be learned. The research on macroprudential policy has now begun in earnest, but it is still quite new and has not yet generated any very clear conclusions on which to base a policy. It is probably unavoidable, therefore, that practical policy-making in coming years will consist to a great extent of “learning by doing” – with the emphasis on both “learning” and “doing”. Stabilisation of the financial cycle One of the two main tasks of macroprudential policy is to counteract the build-up of financial imbalances in the economy. This task can be described as macroprudential policy trying to stabilise something I here choose to call the financial cycle. The academic literature on this subject contains other similar concepts such as “credit cycle” and “leverage cycle.”1 What this means in simple terms is that the volume of loans, indebtedness, asset prices and attitude to risk in the economy vary over time in a way that is not necessarily linked to the economic cycle. One usually calls this the cyclical dimension, or time series dimension, of macroprudential policy.
A Big Mac was thus around 10 per cent more expensive in the United States than in Sweden, in Swedish kronor. At the beginning of 2008 the krona had appreciated so much that a dollar cost 6 kronor. In the United States a Big Mac cost 3.60 dollars then, which corresponded to 21.30 kronor, while in Sweden a Big Mac cost 38 kronor. Now a Big Mac was instead more than 40 per cent cheaper in the United States than in Sweden, in Swedish kronor. In terms of a Big Mac, the real exchange rate had thus strengthened considerably, both as a result of the nominal krona rate strengthening against the dollar and as a result of the price level rising more quickly in Sweden. 21  20  See also Lagerwall and Nessén (2009). 21  The price in the United States has increased from 2.60 to 3.60 dollars, which corresponds to almost 40 per cent, while the price in Sweden has increased from 24 to 38 kronor, which corresponds to almost 60 per cent. One usually defines the real krona exchange rate as ExP*/P, where E is the nominal exchange rate (for example, the number of kronor per dollar), P* is the price level abroad and P is the price level in Sweden. It thus shows the price level in kronor abroad in relation to that in Sweden. An appreciation in the krona’s real  8  BIS Review 3/2010  Figure 4 shows the nominal and real trade-weighted krona rate since 1970.