It is in many ways obvious that asset purchases will have an effect at the height of a financial crisis when the markets are functioning poorly. By entering as a buyer, price falls can be limited. This enables the central bank to reduce the risk that expectations of large price falls and rising risk premiums will be self-fulfilling. It is also easy to see the potential problems with such measures, for instance that the central bank has to carry risk that the market no longer wants to or can price and that private agents are not fully affected by the consequences of their risky investments. It is not as self-evident that asset purchases contribute to making monetary policy more expansionary when the financial markets are functioning normally, but the policy rate is limited by its lower bound. In recent years, however, an extensive research literature has emerged, trying to investigate how asset purchases function.1 The literature identifies several mechanisms that the asset purchases can work through, and also finds some empirical support for central banks’ asset purchases having worked well.2 My interpretation of the experiences in Sweden differs somewhat from the general interpretation of the international experiences, however. To facilitate the continued discussion, I divide the asset purchases into two main phases (see Figure 1). The first phase concerns the purchases of government bonds prior to the pandemic. The second phase concerns the purchases of securities decided during and after the pandemic.
For example, housing prices rose rapidly in many other countries, and also in countries where central banks did not purchase mortgage  14 [30]  bonds (see Figure 10).25 A more important explanation for the price increase was probably that demand for housing increased during the pandemic, when many began planning for a future where they could work from home to a greater extent.26  Asset purchases should have been concluded earlier However, whatever measures were behind this development, I believe that we could have responded to this information in autumn 2020. I am thinking in particular of our monetary policy meeting in November 2020, when we decided to extend and prolong the asset purchase programme. The main elements of the change were that the framework for the total purchases of assets under the programme was extended from SEK 500 billion to SEK 700 billion and that purchases would continue until the end of 2021 instead of the end of the first half of 2021. At this time, it was still very uncertain how the pandemic would develop and how it would in turn affect the economy. Although the economy had begun to recover after the closures during the start of the pandemic, the spread of infection had gained new momentum in the run-up to the monetary policy meeting and uncertainty in the financial markets increased again.