The Riksbank’s objectives and means have been influenced by developments in society Figure 1 illustrates inflation in Sweden over the past 140 years and the exchange rate regimes we have had during this period. Something that becomes clear is that even if we have now become used to a flexible exchange rate, over a long period of time a fixed exchange rate has been much more common. However, from time to time socioeconomic developments in general have led to the prevailing monetary policy regime being reconsidered. 1 As you know, Sweden has not introduced the euro as currency, but on the other hand we were part of a Scandinavian currency union between 1873 and 1924. 2 This began a period with different varieties of fixed exchange rate, which – with the exception of the First World War and a brief period in the 1930s – came to last until 1992. During 1931–1937 the Riksbank worked with a price stability target, for some years this was also combined with a fixed exchange rate. It would take another 50 years until we introduced a price stability target again. 1  This also applies to the central bank’s mandate in a broader sense. See Georgsson, M, Vredin, A. and Åsberg-Sommar, P., “The modern central bank’s mandate and the discussion following the financial crisis” Economic Review 2015:1, Sveriges Riksbank. 2  This cooperation largely came to a halt in connection with the outbreak of the First World War ten years earlier.
1990s crisis: “Things abroad were quite OK, but Sweden was not OK” I hope that it is clear from what I have described so far that the 1990s crisis was in many ways domestically generated. Inflation was far too high in relation to other countries, and the deregulation of the credit market and the too expansionary economic policy created an overheating that ended in disaster: the banking crisis, a currency crisis and also a public finances crisis. In somewhat simplified terms, I usually describe the crisis of the 1990s like this: “things were quite OK abroad, but Sweden was not OK”. There were thus many lessons to be learned with regard to domestic economic policy and not least monetary policy. Important lesson – increased elements of “norm-based thinking” give credibility to the nominal anchor Perhaps the most important individual lesson learnt from the 1990s crisis was the importance of “norm-based thinking” and long-term game rules for economic policy. 5 This came to mark the thinking behind the new monetary policy regime. 4  See Englund, P., “The Swedish Banking Crisis: Roots and Consequences”, Oxford Review of Economic Policy, no. 3, 1999. 5  This way of thinking had been brought up earlier in the debate in Sweden, particularly by the Swedish Centre for Business and Policy Studies’ Economic Policy Group, but did not have a broad impact on practical economic policy until the 1990s.