Another and perhaps even greater problem is that this type of fiscal policy has historically tended to be used too generously and has therefore caused problems with the sustainability of public finances. 19 But there may be reasons to consider that the conditions today are somewhat different than they were a couple of decades ago. As I pointed out, one new circumstance is that central banks now have greater difficulty counteracting economic downturns by cutting the policy rate, because of the lower bound. Another change, especially in Sweden, is that public finances are now in much better condition than they were before. The fiscal policy regulations introduced after the crisis at the beginning of the 1990s have contributed, together with good growth, to the Swedish gross public debt declining from between 70 and 80 per cent of GDP in the mid-1990s to around 40 per cent today. Thus, the prospects for using fiscal policy to counteract an economic downturn are much better nowadays. However, it is not obvious what forms this would take. In the United Kingdom, it has been proposed that the Bank of England’s monetary policy committee should indicate when it is prevented by the lower bound from stimulating the economy as much as it considers appropriate. 20 It is proposed that in these situations the committee should state how much it would have wanted to cut the policy rate. The United Kingdom's Treasury are then invited to implement a fiscal policy measure of its choice as a replacement for the rate cut.
Developments in price level and inflation with a price level target and inflation target Price level  114  Price level target Price level with price level target  114  114  Price level  114  Price level target Price level with inflation target  112  112  112  110  110  110  110  108  108  108  108  106  106  106  106  104  104  104  104  102  102  102  102  100  100  4  4  3  3  3  3  2  2  2  2  1  1  112  100  0  12  24  36  48  60  Inflation  4  1  0  Inflation target Inflation with price level target 0  12  24  36  48  60  0  0  0  12  24  36  48  60  Inflation  100  4  1 Inflation target Inflation with inflation target 0  12  24  36  48  60  0  Note. Constructed example. Vertical axis measures index value (price level) and per cent (inflation). Horizontal axis measures number of months. Source: Andersson, B. and C. A. Claussen (2017), “Alternatives to inflation targeting”, Sveriges Riksbank Economic Review, 2017:1  Figure 8.