The rapid growth of the domestic economy inevitably raises the question of whether this is consistent in the long run with the economic stability that has been achieved in recent years. The growing current account deficit clearly preaches caution and underscores the need for sufficiently tight monetary and fiscal conditions. Growth in 1997 was primarily driven by growing private consumption and fixed investment. Private consumption rose by 6 percent and fixed investment by 9.9 percent. Over the last two years fixed investment has increased sharply following many years of contraction. Investment in power-intensive industry has played an important role, as has investment in commercial buildings. Housing investment has also begun to recover during the last two years but not sufficiently to offset the decline in the previous year. Current Account Deficit The current account deficit turned out smaller in 1997 than had been expected, or just in excess of 8 billion kronur. Merchandise imports grew by 5.9 percent in volume terms, with consumer goods accounting for three-fifths of the increase and investment goods for less than a third. Here it needs to be borne in mind that it may have been mere coincidence whether imports for power-intensive industrial projects were recorded in 1997 or 1998. More appear to have been recorded in 1998 than expected. Merchandise exports grew by less than 2 percent in volume terms, which is not a particularly good performance. The growth of exports is in fact too slow in relation to, for example, the expansion of world trade.
rates based on a sufficiently large number of transactions. The Libor administrator, ICE Benchmark Administration (IBA), reacted to the FSB report by announcing further improvements to ensure that the Libor rates would become better established through the use of actual transactions. Such actual transactions will be used either directly, for calculating the Libor rates, or indirectly, for underpinning the contributions. In this context, the inclusion of short-term loans to large customers or money market instruments, in addition to interbank market transactions, is being examined as a future possibility. In order to assess the FSB proposals, surveys are being conducted to collect data in the currency areas concerned. The SNB conducted such a survey at the beginning of summer for Switzerland, collecting data on bank transactions on the interbank market and with large customers, as well as on trade in money market instruments. More than 50 domestic and foreign banks took part in the survey. The results confirmed that the small number of actual transactions on the money market currently constitutes a problem for the creation of robust benchmark interest rates. Consequently, it seems improbable that a pure transactions-based approach could be implemented for the Swiss franc. This is also the case if other transaction types and additional instruments are taken into account. For this reason, the Swiss franc Libor will continue to be based mainly on contributions by participating banks. 1  2  IOSCO is the International Organization of Securities Commissions.