If importers expect a price change to be temporary, they will no doubt be more prone to absorb the exchange rate fluctuations in their profit margins. That this may have been the case is indicated by some preliminary studies. BIS Review 75/2001  5  •  Generally increased confidence in the low-inflation regime may also have tended to reduce the exchange rate’s pass-through to inflation. More stable expectations about future inflation should make prices less volatile. •  During the 1990s, moreover, competition in the Swedish economy has generally increased, for instance as a consequence of EU membership, continued tariff cuts, the reduction of other barriers to trade and deregulation of the domestic economy. Increased IT trade and the advent of new low-cost producers have had a similar effect. Although such changes are of the one-off type, in the past decade they have affected a series of markets and thereby presumably had a more protracted effect on the aggregate price level. Fig 2. Exchange rate impact on consumer prices 0.20  0.20  0.15  0.15  0.10  0.10 Recursive estimations of TCW coefficients lagged 3 quarters  Jan-01  Jan-00  Jan-99  Jan-98  Jan-97  Jan-96  Jan-95  Jan-94  Jan-93  Jan-92  Jan-91  Jan-90  Jan-89  Jan-88  Jan-87  0.00 Jan-86  0.00 Jan-85  0.05  Jan-84  0.05  Source: The Riksbank  The conclusion from all this is that the pass-through from the exchange rate to consumer prices has probably decreased.
For both historical and geographical reasons, our country is exposed to a considerable commercial risk in Europe, with 60% of our exports going to European countries. These European markets are no longer the most dynamic, nor will they become so in the future. Clearly, in recent years, the emerging economies in Asia have become one of the vibrant regions of the global economy. This is precisely why globalisation makes sense for an economy open to international markets, such as ours. Therefore, it is essential that we step up the diversification process so as to ensure the expansion of our export sector. It is in our own best interests to further strengthen economic relations with Asia. With our liberal philosophy and sound financial standing we have the necessary tools to pursue a policy of openness and enhance our strong presence abroad. Our monetary framework Switzerland is well-known for its stable monetary framework. Average inflation over the last 20 years has been 1.8%, and for the last 13 years, we have had price stability. We have never gone through monetary reforms as many European countries have done over the past few decades. Our monetary regime has been unchanged since 1973, when the peg to the US dollar was removed. Today, the Swiss franc is freely determined by market forces. As a representative of a country that has had floating exchange rates for over thirty years now, I can only underscore the importance of an exchange rate regime that reflects the realities of the market.