According to Smets, all of this indicated that financial stability should be an explicit objective of monetary policy, but that it should be used as a last resort in situations where macroprudential policy and other regulations are not fully successful. The American economist Michael Woodford illustrated in a simple model why monetary policy should in certain situations take account of financial imbalances, even if this  14 See Stock and Watson (2002). In the international economic policy discussion, "the great moderation" or "the  great calm" usually refers to the period from the mid-1980s until 2008. In Sweden, economic development did not become more stable until a little way into the 1990s. See also Hansson, Nessén and Vredin (2018). 15 See Rajan (2005). 16 See Borio and Lowe (2003). 17 See Jonsson and Moran (2014), who show in a model that a positive supply shock can lead to subdued prices, while the output gap and credit gap rise. 18 See Smets (2013) and Woodford (2012). See also the report “Rethinking Monetary Policy” by Eichengreen et al. (2011), which discusses the implications of the financial crisis for central banks. 13 [30]  may mean less favourable target fulfilment for price stability and macroeconomic stability in the short term. Other economists, such as Lars Svensson, argued that monetary policy should continue to focus solely on price stability and macroeconomic stability.19 He said that monetary policy and policies to promote financial stability are distinct and separate policy areas with different objectives, different means and different responsible authorities.
If these problems materialise, they can have major contagion effects and negative external effect on the economy. Therefore, legislators and authorities need to try to change the current regulations. The aim should be to ensure that banks have sufficient buffers to prevent problems from arising. The aim should also be to limit the channels through which the problems – if they do occur – spread to other banks and financial actors. This means that the regulations need to be reviewed. I have highlighted a few issues here: the deposit guarantee, the resolution framework and banking regulations. I believe that a review of all three is needed. However, it is too early to state today exactly what should be changed and how. It is also important when reviewing regulation that it not only solves "yesterday's" problems but also addresses the incentives for risk-taking in the future. Then, authorities all over the world also have to agree on it. All this makes the review extra complicated. Regardless of what exactly comes out of this work, the review will affect the global regulatory standards and thereby the rules that apply in the EU and thus also in Sweden. I believe that we both need to see changes in the regulations and will see such changes. Central banks have a responsibility for financial stability – not just in times of crisis During the 1970s and 1980s, inflation was high and variable and growth was weak.