Sweden is not alone in changing its approach to economic stabilisation policy. A similar change of course has taken place in country after country – in fact, this took place very late in Sweden – in which context the deregulation of the financial markets nationally and internationally played a crucial role. Sweden’s economic successes during this century are the result of an openness towards the surrounding world, a large foreign trade, and the growth of large multinational companies. It would not have been possible to adopt a completely different approach than liberalisation of foreign exchange legislation and the capital market without very large costs for Sweden. It can therefore be said that the alternative to the new approach to economic policy would not have been feasible. However, this also says that when the present economic order changes, then Sweden will follow the tide. No economic policy regime lasts forever. To date we can distinguish at least five distinct regimes/epochs this century. History has not come to an end. 6. Conclusion The principles I have outlined above are illustrated by the Riksbank’s policy this spring. At the special monetary policy meeting on 2 November, the repo rate was at 3.4 per cent. The Riksbank noted then that at that interest rate inflation would be less than the target of two per cent in one or two years’ time.
The shift to a new policy took place between 1993 and 1995. 3  BIS Review 59/1999  However, it should be added with regard to the failed defence of the krona, that experiences of free capital movements were not especially extensive. The Government and the Riksbank and political analysts in Sweden did not have any experience of the conditions for economic policy in a globalised world. The new stabilisation policy regime The Government formulated the goal for monetary policy itself in January 1993. Inflation was to be maintained at two per cent per year with a tolerance interval of +/- 1 per cent. The goal is symmetric. It is as important to bring inflation up to two per cent when actual inflation is under two per cent as it is to bring down inflation when it is higher than the target. This can be said but a lot of practical issues remained to be resolved and the answers are not at all obvious: 1. How is inflation to be measured: by CPI, the GDP deflator, or some other measure of price movements? 2. Shall the Riksbank have other objectives besides price stability? 3. Shall policies be directed at controlling the money supply or inflation directly? 4. How is confidence to be established in the Riksbank’s policy and expectations about low inflation? 1. The inflation target The Riksbank’s objectives has been expressed in the following way in legislation: “The objective of the Riksbank’s operations shall be to maintain price stability.