##downs. the global financial crisis that originated in the us housing market is perhaps an all too clear example of this. the it crash that took place just over 10 years ago is a more normal example of how events in the united states affect the global economy via financial prices. assessing the current situation – the essential starting point for the forecast for sweden assessing the current situation entails producing a forecast for the current quarter, and perhaps the next quarter. at such a short forecasting horizon, not so much importance is the gpm has been developed by the imf. it is available in several versions. for a description of a smaller version of the gpm, see carabenciov, i., i. ermolaev, c. freedman, m. juillard, o. kamenik, d korshunov, d. laxton, and j. laxtion ( 2008 ), “ a small multicountry global projection model with financial - real linkages and oil prices ”, imf working paper no. 08 / 280, international monetary fund. for a more detailed analysis of how the united states affects the global economy and the role that financial links play in this see chapter 4 of the imf ’ s ( international monetary fund ) world economic outlook from april 2007. bis central bankers ’ speeches attached to large macro models ; the assessment is instead based on many different economic indicators. an assessment of the current situation is a kind of mapping of the disruptions and imbalances that are currently affecting the economy ; in other words it describes the situation at the starting point for the forecast. it goes without saying that it is difficult to assess where you are going if you do not know where you are today. assessing the current situation thus lies at the very core of all forecasting. such an assessment does not simply entail producing forecasts for outcome data like gdp and the cpi, it also involves having to assess demand and supply factors in the economy. in this context the assessment of resource utilisation plays a prominent role. if resource utilisation is low then the economy can grow rather rapidly without prices and wages increasing in an alarming way. if it is strained then high growth may lead to overheating tendencies that could be reflected in excessively high inflation. so, even if the riksbank produces fair forecasts of economic growth monetary policy may be less well - balanced if we misjudge resource utilisation. a complica

, resource utilisation and monetary policy ” of 7 october 2010. bis central bankers ’ speeches the world is a big place … to start with, the rest of the world is a big place and we do not have the resources to produce detailed forecasts for individual countries in the same way as we do for sweden. instead we have to limit the number of forecast variables and focus on those parts of the world that are most significant to the swedish economy. for other regions we have to rely to a great extent on the assessments of other forecasters, although this of course does not mean that we copy their forecasts directly. another important aspect is that the forecasts for the different regions of the world must hang together in a consistent way. if, for example, we change the forecast for the united states then this also affects the forecast for the euro area ( and other regions ) and vice versa. this mutual interdependence is not always easy to manage but the preconditions have improved recently following the introduction of a new model for the international outlook. it is called the global projection model ( gpm ) and its main aim is to produce cohesive and consistent forecasts for different regions of the world. 2 the gpm also plays an important role when we want to produce different risk scenarios. … and changeable so, what regions of the world are most important to sweden? the region on our doorstep is of course very important. this primarily includes the euro area, but also the uk, denmark, norway and a couple of other countries in central and eastern europe. most of our trade takes place with this region. a region that has increased in economic importance over time is asia. the emerging economies in asia, led by china, have been the driving force behind the recovery of the global economy following the financial crisis. the importance of these countries for sweden ’ s foreign trade has also shown an increasing trend since the early 1990s. this of course means that it is now more important to monitor these countries than previously. the united states affects sweden through financial links finally, developments in the united states are always important even though in tradeweighted terms the united states only accounts for about 10 per cent. the reason for this is that the us economy often sets the tone for the development of stock markets and bond rates around the world. it is true that our knowledge and understanding of these financial links is limited3 but it appears to be the case that they play a particularly important role during slow