##ciation. in the past three decades the nominal exchange rate has weakened about 90 per cent. more than half of this deterioration can be attributed to the higher inflation in sweden compared with the rest of the world in the 1970s and ’ 80s. mostly of the remaining part of the real deprecation can be explained in terms of relative gdp growth and worsening terms of trade in the same period. but neither of these two factors is relevant to the period since 1992 with a flexible exchange rate : inflation, growth and terms of trade have been at least on a par with the rest of the world. various flows may have played a part in the short run. looking back, it is evident that export growth and rapidly rising swedish share prices may have contributed to the high exchange rate with the euro twelve to eighteen months ago. during the past year the opposite has applied. another factor has been large investments in foreign shares when earlier barriers to risk diversion were removed from the pension system. in september there was also general financial unrest. however, variables such as these have proved to be of little value for forecasting. so personally i do not think it has always been hard to understand the direction, upwards or downwards, of exchange rate movements in recent years. it is the tendency for the krona ’ s average value to be unduly low that has been more difficult to interpret. to some extent, this has presumably been a consequence of the american dollar being generally over - valued against european currencies. i also believe that some part may have been played by various structural factors, for example the construction of the tax system, the internationalisation of the corporate sector with the attendant relocation of certain functions, the status of the swedish krona as the importance of the euro grows in europe and so on. some of these notions are supported both by arguments from principle and by somewhat anecdotal information. there is reason to believe, for instance, that the taxation of both capital gains and wealth has had effects. moreover, at least a part of the residual item in the statistics could have to do with a tendency for firms not to repatriate export receipts to the same extent as before, which in turn may be a consequence of a larger proportion of their central functions now being located abroad. but we do not know how quantitatively important these factors are and i believe that perhaps one should be wary of exaggerating them. still, these are questions that deserve further scrutiny and we intend to pursue them. to

many of the low - hanging fruit from the ict revolution have already been picked. diminishing returns to r & d may have set in. and other secular forces – including adverse demographics and rising inequality – may have acted as additional headwinds to growth. this view sometimes goes by the name secular stagnation. an alternative school of thought believes we may instead be on the cusp of a new great wave of innovation, a fourth industrial revolution. this revolution in innovation will, it is said, be jet - propelled by a set of potentially new gpts, among them ai, big data and robotics. for technology optimists, the story is one of secular innovation, not stagnation. and on this view, the potential gains in productivity and growth could be as large as any of the earlier industrial revolutions. schumpeter ( 1942 ). gordon ( 2012 ), fernald ( 2014 ). summers ( 2013 ) and rachel and smith ( 2015 ). secular stagnation theory was originally proposed by hansen ( 1938 ) in the aftermath of the great depression brynjolfsson and mcafee ( 2014 ) discuss ‘ the second machine age ’. brynjolfsson, rock and syverson ( 2017 ). all speeches are available online at www. bankofengland. co. uk / speeches typically, the two sides of this argument are taken to be in a secular struggle : the dark forces of secular stagnation pitted against the dynamic forces of secular innovation. yet in practice, both arguments have merit. they are certainly not mutually incompatible. it is perfectly possible to imagine a world of rapid innovation which nonetheless leaves large swathes of society in its slipstream. more than that, recent research suggests this is a likely outcome of the fourth industrial revolution. there are good conceptual grounds for thinking the displacement effects of the fourth industrial revolution may be larger than ever - previously. every industrial revolution has resulted in a hollowing - out, typically of mid - skilled tasks. historically, that has meant largely manual, labour - intensive tasks. machine has replaced human in activities that are routine and repetitive. the future could well be very different. for example, the dawning of ai means that humans will no longer having the cognitive playing field to themselves. thinking or non - routine tasks may increasingly be taken up by machines. they will be able to process more quickly, more cheaply and with fewer errors than their human counterpart, at least in some activities. that could