performance ; that is, saving, growth, and financial sector development. this is a tall order, of course, and in practice there are bound to be trade - offs between these goals. however, when i was writing about these issues there seemed to be a significant consensus that, in order to meet these demands, at least in part, a good pension system should be based on three pillars : first, a tax - financed public plan that provides a flat - rate or means - tested basic pension ; second, a mandatory occupational or private ( but publicly regulated ) funded pension scheme ; and third, a voluntary pension saving scheme, often with tax incentives. three pillars, rather than one, are needed in order to accommodate the tradeoffs between goals, make the overall system more resilient to different types of shocks, and the main article referred to can be found http : / / www. sedlabanki. is / uploads / files / mb011 _ 5. pdf. the speech can be found on the http : / / www. sedlabanki. is / uploads / files / mb041 _ 7. pdf. on the central central bank bank of of iceland iceland website : website : provide for flexibility and choice. this is, of course, familiar to most of you here, and an excellent – by now, almost classic – presentation can be found in the 1994 world bank publication : averting the old age crisis. by the turn of the century, the icelandic pension system had taken on many of these attributes. the public pension system provided a low basic pension but a much higher supplementary pension that was, however, means - tested, also against pensions from other sources. this meant that, as the occupational or second - pillar pension funds matured, the public pension would dwindle in relative terms. at the time, pension payments from the public system were still somewhat larger than those from the occupational pension funds, but the difference was slight and, as the total pensions paid out by the occupational pension funds were growing much faster, they did overtake the public system in subsequent years. it is instructive in this regard that, according to oecd, the balance between public and private provision of mandatory pensions is heavily in favour of the private provision in iceland, or 84 %, which is the highest rate amongst oecd countries. as a result, public pension spending in iceland is 2 % of gdp, compared to the o

first place i believe that both wage and pricing behaviour are affected by inflation expectations being low and stable. it takes time before an increased use of resources has an effect on price and pay increases! in the same way as it takes time to adjust inflation expectations downwards, there is inertia in shifting them upwards. this would mean that even if demand and production are higher than what is sustainable in the long - term, that this is not marked in price development before the use of resources has come under great strain. in the second place deregulations and increased competition can lead to consumer prices being dampened as a result of excess profits being forced down in previously sheltered industries. initially, increased competition will perhaps primarily lead to redistribution of real incomes. in the somewhat longer term, productivity will also be improved. however, it is uncertain how quickly and to what extent potential growth will increase as a result of increased competition. if monetary policy assessments are based on an overoptimistic view of growth prospects and developments in consumer prices do not give any signals about this, this can lead to considerable imbalances being built up. sooner or later, however, inflation will accelerate. when the scope for reduced profit margins as a result of deregulations and increased competition begins to be exhausted and demand pressure finally begins to be expressed in rising prices, there is a risk that price increases will be large and come quickly. expectations of future growth prospects can then be abruptly interrupted. the consequences can be that demand drops if companies and households are then too highly indebted. if a lot of companies during the overheating period, have based their investment decisions on incorrect expectations of the demand trend, the fall can be great. the example shows a development where monetary policy by acting too late creates high variability in both inflation and output. the effects need not be visible either until after the forecast horizon. the economic costs of waiting too long to change the direction of monetary policy can be high if imbalances have grown great and the fall in production is large. the same course of events as in usa? although the prospects for the swedish economy look very bright, we cannot therefore disregard the risk of overoptimism. history has shown many times that an optimism that was well - founded to start with has become self - reinforcing and has ended up by creating considerable imbalances in the economy. developments in japan in the 1980s and in asia in the 1990s are clear examples of this. the exceptionally long