Development of the krona has been weak for a few years and there is no doubt that one reason for this is indeed the exchange-rate channel and the expansionary policy to maintain confidence in the inflation target. It would be strange if this were not the case as this is partly how monetary policy works. But, and this is an important ‘but’, it is far from the whole picture. It is obvious that another part of the explanation is that currencies in small, open economies tend to depreciate when there is turbulence in the world. For example the Norwegian krone and the New Zealand dollar have experienced a very similar development as the Swedish krona in recent years, despite the policy rate in Norway and New Zealand being 1.50 and 1 per cent respectively, that is to say significantly higher than in Sweden (Figure 3). This is a very important observation to consider when criticism is being levelled at the Swedish inflation-targeting regime. It gives some perspective to, among other aspects, the “krona collapse” that is often highlighted in the debate. 12 [17]  But if one holds the view that the movements in the krona are not acceptable, one can of course argue for a return to a fixed exchange rate. This would, however, be a political decision and nothing the Riksbank can decide on. Under the Currency Rate Act, the government takes decisions on the exchange-rate system that is to be applied.
There are many institutional arrangements, ranging from formal contracts between the government and central bank to non-formalised consultations between the two bodies. The efficiency of such arrangements, however, depends in most cases on their actual implementation. Now I come to the fiscal sphere. A trend towards rule-based policy can be observed here as well, albeit with some time lag and in a different form compared with monetary policy. The difference originates mainly from the fact that fiscal policy is by definition a political issue with strong redistribution aspects, which cannot easily be mandated out of direct democratic control. The independence solution is thus not readily available here, even though there have been such suggestions in the economic literature. This contributes to the fact that no single elegant model has yet been found in practice. The existing rules usually take the form of self-imposed constraints, such as legal constraints (balanced-budget acts in some countries) or international treaties (S&G Pact). Apart from this difference, though, the aim to implement rules stems from the same reasons and faces similar challenges as in monetary policy. The idea that policy should be designed in a way that does not put short-term political gains above the longer-term interests of society, that takes into account its impact on private expectations, and that is transparent to the public, is common to the monetary and  fiscal spheres. Similarly, the rules must also address the issue of their costs in terms of macroeconomic stabilisation and finding a proper policy mix.