( 2011 ), monetary policy and financial crises – some reflections. speech at danske bank, stockholm, 21 december. sveriges riksbank. paciorek, andrew ( 2013 ), supply constraints and housing market dynamics. journal of urban economics 77, pp. 11 – 26. reserve bank of new zealand ( 2012 ), news release announcing 2012 policy targets agreement, 20 september. seb ( 2013 ), allt fler tror pa hogre bostadspriser. ( more people believe housing prices will rise. ) information to the media, 11 november. skop ( 2013 ), hushallens forvantningar om bostadsmarknaden. ( households ’ expectations regarding the housing market. ) 7 november 2013, press release. smets, frank ( 2013 ), financial stability and monetary policy : how closely interlinked? sveriges riksbank economic review 2013 : 3. jubilee issue. stein, jeremy c. ( 2013 ), overheating in credit markets : origins, measurement, and policy responses. speech at “ restoring household financial stability after the great recession : why household balance sheets matter ”, research symposium sponsored by the federal reserve bank of st. louis, st. louis, missouri. svensson, lars e. o. ( 2013 ), some lessons from six years of practical inflation targeting. sveriges riksbank economic review 2013 : 3. jubilee issue. swedbank ( 2013 ), bostadsbristen kostar 21 miljarder per ar. ( housing shortage costs sek 21 billion a year. ) makrofokus sverige, makroanalys 11 november 2013. woodford, michael ( 2012 ), inflation targeting and financial stability. sveriges riksbank economic review 2012 : 1. bis central bankers ’ speeches figure 1. gdp per capita and employment rate compared with pre - crisis figures change in per cent 2007 – 2012 and 2008q1 – 2013q2 ( alt. most recent outcomes ) respectively ger gbr employment rate - 2 fin ita - 6 - 2 aus eu can nor ned - 6 usa den - 10 jpn aut sui fra nzl swe bel - 10 por irl - 14 - 14 esp - 18 - 18 gre - 22 - 22 - 22 - 17 - 12 - 7 gdp per capita - 2 note. gdp per capita, annual data, constant 2005 usd. employment rate, ages 15 –

uncertainty ”, economic review, 2010 : 1, sveriges riksbank. the calculations are based on forecasts from 1999 to 2010. bis central bankers ’ speeches no forecasting performance in the longer run. at two and three years ahead we had on average made equally good forecasts if we had used the average growth or inflation rate instead of our own forecasts. 8 unemployment – better forecasting ability than for gdp and inflation unemployment is more sluggish than gdp growth. if unemployment is very high to start with, it is probable that it will also be high in a year ’ s time. this should mean that the forecasting ability for unemployment, and other measures of resource utilisation, are better than for gdp growth and inflation. our forecasting performance with regard to unemployment is quite rightly slightly better, with a forecasting error one year ahead that is 30 – 40 per cent lower than the forecasting error for the naive forecast ( see figure 7 ). 9 however, there is still no forecasting ability two and three years ahead. the repo rate – is sometimes outside of the uncertainty bands the fourth standard figure in our monetary policy reports and updates refers to the forecast for the repo rate and the uncertainty concerning this ( see figure 8 ). there is an important difference of principle between the decision on the repo rate up to the next monetary policy meeting and the assessment of the repo rate path after that, that is, the forecast for the repo rate over the coming three years. we are careful to point out that the repo - rate path is “ a forecast, not a promise ”. the uncertainty bands shown in the figure are based on forecast errors for risk - adjusted market rates from 1999 to 2007 and after that on the riksbank ’ s own forecast errors. the uncertainty increases as the forecast horizon lengthens, here, too. the figure shows, for instance, that the repo rate in three years ’ time will with a 90 per cent probability be between 0 and 7 per cent. and there is a 10 per cent probability that it will be outside of this interval! the fact that the repo rate is sometimes outside of the uncertainty bands is illustrated by the forecast in september 2008 just before the financial crisis hit europe and sweden with full force ( see figure 9 ). the repo rate was cut over the following three quarters to a much lower level than the lower limit for the 90 per cent uncertainty band. uncertainty in theory our