Competition also facilitates the work on holding back inflation. The EMU has particular importance for the scope of the trade. Many economists have tried to estimate this gain by looking at the way fixed and floating exchanges respectively affect trade, and they have found very little difference. However, a single currency is not the same as a fixed exchange rate. There are considerable practical and psychological differences. Professor Andrew K. Rose at Berkeley in the USA, together with some other economists, has instead compared trade within monetary unions with trade between countries outside of the monetary union, and made adjustments for facts such as monetary unions often sharing the same language, culture and other regulatory frameworks. When Professor Rose presented such a study for Sweden some time ago, he claimed that EMU could increase trade and integration by as much as 30-50 per cent over the course of a few decades. This could lead to an increase in Swedish welfare of over ten per cent in the long term. Rose himself admits that the figures are uncertain and other economists believe in much lower figures for trade gains. So what about the disadvantages? Giving up one’s own currency entails also giving up some of the right to self-determination in economic policy. The instrumental rate would no longer be set in Stockholm, but in Frankfurt and would reflect the economic situation in a large monetary area.
It can typically run into hundreds of pages, with detailed descriptions about the company’s business operations, its competitive environment, governance practices, and risk exposures, not to mention a full set of financial statements. Most retail investors cannot easily digest all this information. But the scrutiny of the prospectus by analysts and institutional investors helps to bring to light any significant weakness in the company. Having said that, I must acknowledge that greater disclosure does not always improve our understanding of investment products. While all material and relevant information must be disclosed, there is a tendency for disclosure to be voluminous and legalistic – often made for the purpose of limiting legal liability rather than facilitating understanding by retail investors. MAS therefore seeks to ensure that information disclosed is not only adequate but also transparent. Transparency MAS has sharpened the focus on providing investors information in a clear and concise manner to aid understanding. Earlier this year, we introduced a new regulatory requirement for a Product Highlights Sheet to accompany offers of investment products that come with prospectuses. Its purpose is to convey key risks and product information in plain language and in a simple question-and-answer format. Let me give an example. In one recent prospectus, the right of the investors to cancel their subscription within seven days was spelled out in two rather technical paragraphs using a total of 170 words. In the Product Highlights Sheet, the same point was made in two simple sentences.