In modern open economies, central banks adjust their benchmark policy rates to target inflation and maintain financial stability. Changes in these policy rates have strong transmission effects on financial markets, particularly domestic equity markets.
Fig. 3 shows how the Swedish central bank, Sveriges Riksbank, altered its repo rate over a seven-year period.
| Date | Policy Rate (%) |
|---|---|
| 2010-01-01 | 0.25 |
| 2010-07-01 | 0.50 |
| 2011-02-01 | 1.50 |
| 2011-07-01 | 2.00 |
| 2011-12-01 | 1.75 |
| 2014-10-01 | 0.00 |
| 2015-02-01 | -0.10 |
| 2016-02-01 | -0.50 |
Using Fig. 3, explain what is likely to have happened to Swedish share prices at the start and the end of the period shown.
