cases lag behind and in other cases have large gaps. those of you who have read piketty's best - seller capital in the twenty - first century also know that one can give the question of distributional effects much greater room than i have scope for today. what i want to say with these reservations is that those of you who are expecting to hear exactly how great the distributional effects of monetary policy have been will 1 see, for instance, the bank of england ( 2012 ), oecd ( 2015 ), bindseil et al. ( 2015 ), deutsche bundesbank ( 2016 ), european parliament ( 2016 ), domanski et al. ( 2016 ) and amaral ( 2017 ). 2 dir. 2016 : 114 2 unfortunately be disappointed. my somewhat more modest aim is to make a contribution to the discussion by examining the distributional effects of the policy and adding shades of meaning to these effects. what i hope to convince you of today is that monetary policy also affects household income and wealth in ways that are more indirect, but probably more meaningful, than via asset prices. while an expansionary monetary policy entails rising asset prices in the short term, this is compensated by lower unemployment, higher employment and stronger growth. a monetary policy that succeeds in the task of attaining price stability also counteracts the negative distributional effects of inflation. an expansionary monetary policy to defend the inflation target but, as i said, rising asset prices have been an element of the economic upturn in recent years. and during periods when stock prices are rising, the income distribution is more uneven between households – this can be seen from standard measures of dispersion of the income distribution, such as the so - called gini coefficient ( see figure 1 ). figure 1. gini coefficient for disposable income and stock market movements 0. 32 stock index ( right scale ) gini, excl. capital gains ( left scale ) 0. 30 gini, incl. capital gains ( left scale ) 0. 28 0. 26 0. 24 0. 22 0. 20 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 note. the gini coefficient is a measure of statistical dispersion of, for instance, incomes. the gini coefficient can be between 0 and 1, where a higher value entails greater inequality. the figures are from statistics sweden ’ s surveys household finances 1995 - 2011

. depending on how large the deviation is and its cause, the time horizon may be extended. this flexibility makes it possible for the riksbank to take into account developments in the real economy in its monetary policy considerations. in the short term, monetary policy can contribute to reducing the fluctuations in production and employment that arise during an economic cycle. as i will discuss today, however, the possibility of achieving this type of stabilisation is also dependent on inflation expectations being reasonably stabile. if inflation expectations are stable, a change in the policy rate will have a direct effect on the real interest rate, which corresponds to the nominal interest rate minus expected inflation. as it is the real interest rate that determines aggregate demand, monetary policy may in the short term have an impact on the real economy. today i shall take up the question of what monetary policy can affect in the short and long run. i shall use some examples to illustrate the balance that must be attained between the inflation target and developments in the real economy. functioning financial markets are of vital significance for the functioning of the whole economy. the riksbank ’ s other main task, beside monetary policy, is to safeguard financial stability. during the current financial crisis the riksbank has taken a number of measures to safeguard financial stability. this has been parallel to taking monetary policy measures. monetary policy and financial stability are closely linked. the possibility to conduct efficient monetary policy depends on the transmission mechanism functioning. i shall return to this question later in my speech. finally, i shall make some concluding comments. the influence of monetary policy in the short and long run – research at the end of the 1950s the economist a. w. phillips found a negative relationship between unemployment and inflation by studying data from the uk for the period 1861 - 1957 1, a relationship that is usually referred to as the phillips curve. this shows that higher employment can be achieved at the cost of higher inflation. it was thus long believed that one could " buy ” long - term lower unemployment by pushing up inflation. however this relationship was empirically proved not to hold in the long run. in the 1970s, for instance, there were periods with both high unemployment and high inflation, what is known as stagflation. the relationship was also tackled from a theoretical angle. in a famous article from the late 1960s milton friedman discussed what monetary policy can and cannot achieve. 2 his view was that in the long run monetary policy is unable to affect real economic variables such as unemployment and gdp