It is not part of our mandate. This is more effectively done by fiscal policy. I don’t believe any other central bank specifically takes this into account either. • But going forward, the Swedish parliamentary committee on finance has asked the Riksbank to evaluate the distributional effects of the expansionary monetary policy in recent years. So this is an area we are working on now and will continue to do so. • As the theme of this conference is “reshaping globalisation” I would like to end by adding some words about my views on the global perspective on equality and the possible explanations for increased inequality in many developed economies during recent decades. As I have said, the contribution from monetary policy to equality should in my view in general be minor. • I do not think you can talk about globalisation without also talking about technology. Some argue that increased inequality in many countries is due to the latest technological progress having been skills biased, resulting in a rise in the skill premium and the decline of some labour market institutions in advanced economies, emerging markets and developing countries 4.
Individual lenders fail to take into account that their behaviour has an impact on the ability of other market participants to bear debt. This applies, for example, when investors are increasingly exposed to the same risks and invest in the same markets. For instance, let us assume that a large number of companies or households simultaneously take out loans to purchase real estate. This situation creates systemic risk because a negative surprise on the real estate market can lead to many of these investors incurring losses at the same time, forcing them to sell off their assets so that they can continue meeting their loan 15  On ‘Black Monday’, 19 October 1987, the Dow Jones index plunged by more than 20%. As a result, equity markets around the world came under heavy pressure. Page 8/16  commitments. This can generate a self-reinforcing spiral of falling real estate prices, more borrowers who can no longer service their debts, and thus greater pressure to sell. Distorted expectations  Moreover, the behaviour of economic agents during a credit boom is not always entirely rational. This brings us to the third factor that can contribute to excesses on the credit market – distorted expectations (cf. slide 12). A glance at the history of financial crises shows: The longer an economic upturn persists, and the higher asset prices rise at the same time, the more over-optimistic economic agents are about future growth.