on more employees. using the same reasoning, unemployment would therefore rise if inflation was pushed down by tightening monetary policy. it is this relationship that is usually described with the aid of what is known as the short - term phillips curve. some of the criticism aimed at monetary policy in recent years appears to be based on the assumption that there is a clear - cut long - term relationship between inflation and unemployment. however, it is not possible to buy lower unemployment in the longer term by allowing inflation to rise. sooner or later wage - earners will require compensation for the higher inflation by raising their wage demands. as prices and wages rise, the stimulating effect of monetary policy will wane. demand will fall again and employment will decline. in the long term, unemployment will return to its long - term equilibrium level. a systematic, expansionary monetary policy would only have the consequence that inflation and inflation expectations would soar. this correlation is usually illustrated with the aid of the so - called long - term phillips curve. there is currently a broad consensus on this, both in central bank circles and the academic world. in my opinion, it is therefore not possible to claim that an economic policy that aims for low and stable inflation would in itself lead to higher unemployment. another part of the criticism is based on the assumption that it is not possible to buy lower unemployment by pushing up inflation, although there is instead apparently an assumption that if only the riksbank would ensure that inflation remains at 2 per cent, then unemployment would stabilise around its long - term equilibrium level. in practice, however, there is no such simple relationship between inflation and unemployment. firstly, unemployment is affected by a number of factors other than inflation, most of which have nothing to do with monetary policy, such as productivity changes, changes in regulatory systems and various shocks that regularly impact on the economy. similarly, inflation is affected not only by developments in the labour market, but by many other factors. empirical studies have shown that unemployment “ explains ” a relatively small percentage of total inflation. this means that inflation developments are largely “ explained ” by other factors than unemployment. secondly, it has proved very difficult to assess what is a long - term equilibrium level for unemployment and moreover that this also varies over time. one conclusion of this is that even if the riksbank were to always succeed in holding inflation at the target, this would be no guarantee that unemployment would be low and stable. unemployment is instead determined in the long run by how well

- 2005 ”, box in inflation report no. 1 and sveriges riksbank ( 2005 ), “ material for assessing monetary policy 2002 - 2004 ”, box in inflation report no. 1. see the references in note 2. the riksbank ’ s calculations imply, for example, that an interest rate a half a percentage point lower for six months would have led to lower unemployment corresponding to two or three tenths of a percentage point. however, i would like to emphasise that this type of calculation is very uncertain. given this, i believe that monetary policy cannot be said to have contributed significantly to the high unemployment. what other possible explanations are there? what can explain the rise in unemployment? as i mentioned initially, unemployment was held down in the 1970s and 1980s with an economic policy that was not sustainable in the long term. i believe that this could have concealed structural problems in the labour market that only became visible when the economic policy regime was changed in the early 1990s. if one studies unemployment, particularly total unemployment, over a long period of time, one can see that it has shown a trend increase ever since the end of the 1960s. this also applies if one excludes the years after the change in economic policy regime. open unemployment did not fall more than to around 4 per cent at the peak of the most recent economic upturn. this also indicates that there are structural problems in the labour market that have also increased over time. there are, for instance, signs that the matching of unemployed and vacancies has deteriorated after the 1990s crisis. increased globalisation and stiffer international competition, and the ensuing structural transformation, may also have played a role. the pressure for change in the labour market has been strong and adjustments have not been made as smoothly as might have been desirable. it is evident that the high unemployment that arose in connection with the crisis has to some extent been persistent. research shows that the long - term unemployment level may be affected by major changes in actual unemployment. there is also research that show that generous unemployment insurances may contribute to the persistency of unemployment. especially after major structural crises have occurred, such as the one in sweden at the beginning of the 1990s. 4 i shall not develop this further. the functioning of the labour market lies outside the riksbank ’ s field of responsibility and there are others who are better qualified to discuss the problems in this area than i am. my main message is that there are many indications of considerable structural problems