Foreign investors sold Ericsson shares to a value of SEK 30 billion between September 2000 and February 2001. At the same time, the AP funds' new investment regulations and investments in the premium pension scheme have led to substantial outflows. These flows can undoubtedly have had significance in the short term, although this effect should not be exaggerated. However, the situation in Sweden is basically stable, as I pointed out earlier. There is no distrust of Sweden pressurising the exchange rate as at the beginning of the 1990s; no fundamental imbalance in our economy to arouse international concern. One measure of this is the spread between the longterm German interest rate and the corresponding Swedish interest rate, which grazed 5 percentage points during the crisis period at the beginning of the 1990s. That was how much more the pension funds in the USA and Japan wanted to receive to invest money in the unstable Sweden rather than the secure Germany. Today the interest rate margin is roughly the same and has been so since early 1999. The long-term confidence in the Swedish economy appears unshaken and the explanation for the weak krona must therefore be sought in the financial markets rather than the real economy. A floating exchange rate floats! If the krona is undervalued, shouldn't we at the Riksbank do something about it? We do have a foreign currency reserve that can be used to buy krona if necessary. However, there is good reason to approach this question with great caution.
One important reason is, of course, the above, namely that the weakness of the krona is the other side of the dollar's strength and reflects the international  BIS Review 34/2001  3  financial unease. We can't do very much about this, no more than can the Canadians or Australians who are in the same situation. Another reason is that we have a price stability target and not an exchange rate target and trying to maintain both with the aid of the repo rate is not an easy task. In many cases the targets are in total conflict with one another. We in Sweden have chosen a floating exchange rate and will therefore have to accept that the exchange rate floats. If the Riksbank were to intervene on the market now and then, we could easily cause speculations as to what exchange rate we might have as a target. The forecasts as to when the Riksbank might intervene and the positions it might take would then become a part of stockbrokers' daily work. This is not a good thing, as it increases unease on the market, rather than reducing it. Nevertheless, it should be remembered that every central bank may need to intervene under certain circumstances, either by buying or selling currency, e.g. to restore some order to a market that has become unbalanced or to even out sudden large flows. In both cases, one should of course state the purpose of the intervention.