For example, the central bank could commit to being the lender of last resort as long as it judged the firm to be solvent and with sufficient collateral. This would reduce the coordination problem and the risk of panics sparked by uncertainty among lenders about what other creditors think. If the central bank is willing to provide backstop liquidity, then a lender that judges the financial firm to be solvent should be willing to lend. The backstop liquidity ensures timely repayment. The lender of last resort role eliminates the externality in which the expectations about the willingness of one lender to lend influences the decisions of others. However, providing a liquidity backstop is not without its own set of problems. If firms have liquidity backstops that are viewed as credible, then this creates moral hazard. Firms do not have to worry as much about what lenders think about their capital adequacy or the size of their liquidity buffers. This creates incentives to run leaner in terms of capital and liquidity, which increases the risks to the backstop liquidity provider. To mitigate such effects, the backstop liquidity provider could presumably charge financial firms for the value of the backstop. But what fee would be appropriate? It is difficult to assess the probability of financial panics and the value of backstop liquidity facilities.7 Fifth, regulators could take steps to reduce the difference between the value of the firm dead versus alive.
The idea behind the recent policy has been to avoid the exchange rate appreciating too rapidly and in this way to hold inflation up until economic activity takes over as the driving force. Thus, the plan has not been to try to permanently battle against fundamentals. 12 This has so far worked relatively well, but we are now beginning to approach the critical stage where economic activity is supposed to take over the baton. One cannot escape the fact that inflation outcomes have been somewhat worrying recently. It is now mostly the CPI that is showing a clear upturn. The more underlying rate of inflation measured by the CPIF excluding energy prices has over the year developed more or less sideways, or even shown a tendency to decline slightly. The inflation outcomes in coming months will be very important. 10 See, for example, Goodfriend (2016). 11 For a more detailed discussion of the problem of very negative policy rates, see Alsterlind et al (2015) and  Nessén (2016). 12 However, for my own part I am not convinced that fundamentals currently need to lead to a signifi cant krona appreciation in real terms, see the minutes of the Riksbank's monetary policy meetings in September and October. 10 [20]  The conditions for economic activity to soon take over as the main driving force behind inflation nevertheless look good, given the positive development we are seeing in the real economy.