increases in participation rates and employment. and this appears even more urgent if we consider that, over the same period, europe ’ s growth performance has been constrained by its low rate of population growth and the ageing of its society. as regards demographic trends, the working age population of the euro area grew by an average of 0. 4 % per year over the period 1996 - 2006, compared with 1. 3 % in the united european commission – ameco database. european commission – ameco database. eurostat. states. 4 these demographic trends therefore account for 0. 9 percentage point of the euro area - us growth differential, “ in favour ” of the us. taken together, labour utilisation and demographic trends can explain 0. 5 percentage point of the difference between the growth rates of the united states and the euro area, “ in favour ” of the us. on the basis of a 1. 1 percentage point difference in annual average growth between the us and the euro area over the period 1996 - 2006, the remaining differential of 0. 6 % for real gdp growth indeed stems from annual average labour productivity growth of 1. 3 % in the euro area and 1. 9 % in the united states. it is true that the positive labour supply shock over the past decade might have contributed to the disappointing productivity growth seen in the euro area. however, standard growth accounting analyses show that developments in labour supply are only part of the story. the slowdown in labour productivity growth can be attributed to a large extent to a marked deceleration in total factor productivity. those countries that have tended to compensate for the positive labour supply shock by increasing investment growth and / or exploiting the potential efficiency gains offered by new technology in particular have enjoyed stronger labour productivity growth. for instance, over the period 1996 - 2005 the direct contribution of ict to labour productivity growth, as measured by the contribution of ict capital services, has in the united states been roughly double that observed in the euro area ( 0. 63 percentage point in the united states, compared with 0. 37 percentage point in the euro area ). similarly, hourly labour productivity growth in ict manufacturing and service sectors 5 grew by an average of 12. 6 % and 6. 5 % in the united states and the euro area respectively over that period. 6 there could, of course, be many reasons for this decline in total factor productivity growth rates, and this conference has been useful in shedding light on some explanatory factors.

vredin for discussions and comments on previous versions of the text. * 1 concern two related questions : should the purchase and sale of bonds be an active monetary policy tool even in the future? do large bond holdings strengthen the transmission of central bank policy rates to market rates? before i analyse these questions in more detail, i would like provide some background by describing both what central bank balance sheets looked like before the crisis and how they have developed since, and how the design of monetary policy interacts with the balance sheet. this background is important in order to be able to assess how the riksbank ’ s balance sheet should develop over the longer term and be able to relate to the discussion in other countries. central bank balance sheets were quite different prior to the financial crisis, both in composition and size. we can expect countries in which monetary policy steers towards similar future inflation targets to have comparable interest rate levels. the balance sheets may, however, look quite different. my main message today is that the monetary policy arguments for a large balance sheet are, in my opinion, not particularly strong in the swedish context. indeed, there are also risks associated with maintaining a large balance sheet. the most likely scenario is therefore that the riksbank ’ s balance sheet will, in a future normal situation, be substantially smaller than it is today. there is no “ normal ” balance sheet figure 2 shows what various central bank balance sheets looked like just over a decade ago, prior to the global financial crisis. the most striking feature of the figure is that balance sheets looked different in different countries. in some countries, for example the united states and canada, the central bank had a lean balance sheet, the size of which was determined in practice by the demand for banknotes in the economy. the asset side was dominated by domestic government bonds while the liability side was dominated by issued banknotes. these lean balance sheets meant that they had an almost entirely risk - free financial position as the central bank receives interest payments on the assets while the liabilities are cost - free. in this way and if the interest rate is sufficiently high and the banknote demand sufficiently large, the central bank can fund its own operations and deliver a surplus to the state. the riksbank and the swiss national bank also had relatively minimalistic balance sheets where the liability side was dominated by cost - free capital, but, apart from banknotes, these central banks had accumulated equity on the liability side. the asset side was dominated by gold