higher growth and increasing investment could be rising real interest rates. in a partial analysis, where everything else remains unchanged within the economy, this is a correct conclusion. however, everything else is not the same. the real interest rate is determined internationally to a significant degree and is affected by several factors, including individual people ’ s evaluation of consumption today, compared with consumption later and the degree of their aversion to uncertainty. it is only if we assume that consumption today is valued as highly as consumption tomorrow and disregard the uncertainty, that the growth rate can be used as an approximation of what the neutral real interest rate should be. we are now seeing, at the same time as the higher growth, several other changes that affect the real interest rate, such as an ageing population. it is difficult to draw a clear conclusion on the total effect of all these changes on the real interest rate. this is one of the areas in which the riksbank is working on improving its knowledge. another discussion held in the trail of the new technology, deregulation and increasing competition is how the effects of the relative price changes on general price developments should be dealt with. the basic idea is that the swedish price level is so high in relation to other countries that it needs to be adjusted downwards, so that swedish citizens ’ purchasing power will increase. this is the same as saying that the real exchange rate is undervalued, i. e. we can buy too few imported goods for what we export. this could be corrected by strengthening the krona through a stronger nominal exchange rate or by price increases on goods subject to competition being kept lower than those in other countries. it is sometimes claimed in the economic debate that non - recurring effects of deregulation and increased competition could be utilised by the riksbank altering its price stability target from 2 % to a lower figure. however, this would involve temporary effects influencing the target formulation, which would erase the stability in the target formulation that has an intrinsic value. it is still possible to strengthen purchasing power with an unchanged operational target formulation by a nominal appreciation of the krona. it has sometimes been claimed that the “ new economy ” could lead to completely new economic relations. i see no reasons for such a change. it is more likely that technological developments lead to reality approaching the simplified assumptions that form the basis of many economic models, such as a large measure of competition and low transaction costs. thus, most of the models the riksbank uses today

financial imbalances must have been allowed to build up during the preceding period. in other words, monetary policy makers must have seen no reason or been unable to prevent these imbalances from building up. thus, an important question is whether a monetary policy for price stability will indirectly prevent excessive debt accumulation in the economy? in other words, how likely is it that large imbalances will have time to build up before the central bank judges that its inflation target is threatened and therefore raises interest rates? can large imbalances materialise without inflationary pressure building up? a related question is whether the choice of monetary policy strategy has a bearing on the risk of financial imbalances and financial crises? for example, will a monetary policy based on a simple policy rule lead to a lower or higher risk of financial imbalances building up compared to a more discretionary policy? will an inflation targeting regime lead to a larger or smaller risk of imbalances building up compared to a monetary targeting regime? these highly relevant questions are being asked by a number of central banks in emerging markets that have recently been forced to abandon a fixed exchange rate policy that was no longer sustainable. the papers to be presented at this conference will hopefully throw some light on a number of the questions i have raised here this morning. i look forward to learning what our distinguished guests have to say on these matters.