1. The Impossible Trinity and Constraints on Policy options Reserve Bank of India First International Research Conference February 12-13 2010 Irma Rosenberg Board Member of Swedish National Debt Office

2. The impossible trinity Out of the 3 objectives Free capital mobility Exchange rate stability Monetary independence policy makers can choose only 2

3. Emerging Market Countries:Exchange Rate Regimes 1991, 1999 and 2006 Source: Fisher (2008), IMF 8% (3) 13% (5) 15% (6) 56% (22) 41% (16) 36% (14) 36% (14) 46% (18) 49% (19) Note: Number of countries in parenthesis

4. The Trilemma Choices in Asia Financial Exhange rate Monetary policy openness* regime regime China 1 ManagedStability of val. of currency Hong Kong0 Fixed Currency board India1 Managed floatPrice stability and adequate credit supply Indonesia1 Managed floatInflation target 2005 Korea1 F loatInflation target 1998 Malaysia1 Managed floatPrice stability/sustainable growth Phillipines1 Managed floatInflation target 2002 Singapore0 ManagedPrice stability (intermediate target) Thailand1 Managed floatInflation target 2000 Note IMF Index 2005, 1= restrictions 0= no restrictions Source: Hannoun (2007) and central bank webs

5. Sweden Inflation expectations well anchored Annual percentage change Note. Refers to money market participants. Sources: TNS Sifo Prospera and Statistics Sweden

6. Sweden Inflation has fallen remarkably CPI, annual percentage change Sources: Statistics Sweden and the Riksbank Fixed exchange rate Floating exchange rate and inflation targetting

7. Sweden Growth is higher GDP, annual percentage change Source: Statistics Sweden Fixed exchange rate Floating exchange rate and inflation targetting