kristina persson : the riksbank, growth and inflation speech by ms kristina persson, deputy governor of sveriges riksbank, at fa ¶ retagarnas riksorganisation, trosa, 28 february 2002. * * * firstly, i would like to thank you for the invitation to come here. it is important to meet with representatives of industry and be able to talk about the role of the riksbank and its significance for growth. the role of the riksbank the objective for monetary policy is clearly stated in the sveriges riksbank act - to maintain price stability. the riksbank has further defined this in its inflation target, i. e. that cpi inflation shall amount to 2 per cent, with a tolerated deviation interval of plus / minus one percentage point. this means that when we are determining the direction for monetary policy, we must take into account changes in a number of areas that affect price trends directly or indirectly. i intend to comment on one of these in particular, namely the potential growth of the swedish economy in a long - term perspective. the sveriges riksbank act also establishes that the riksbank shall be independent, this means that we six members of the executive board, who make decisions regarding the instrumental rate, may not request or receive instructions from the government or parliament. the idea is that we are thereby always free to safeguard the value of money and are not tempted, for instance, to contribute to an increase in growth and employment through lower interest rates during an election year. at the beginning of the new monetary policy regime, when the fixed exchange rate was abandoned in 1992, there was a certain amount of criticism of the inflation target ; many people feared that the unconditional attachment to an inflation norm would have a negative effect on growth and employment. a monetary policy aimed at price stability could lead to a prolonged period of low growth and, in extreme cases, to declining production. it may appear as though this objective forced the riksbank to give a lower priority to the development of the real economy, i. e. production and employment. we have only one objective for monetary policy, unlike, for instance, the us central bank that also has the task of taking into consideration the effects of interest rate decisions on growth and employment. however, in actual fact, the difference is probably not so great - indirectly the assessments of the future path of the real economy also play an important role in our decisions.

question is whether these improved conditions are enough to provide sweden with stable, good growth over the next five to ten years. can we trust that the problems of the 1970s, 1980s and 1990s are definitely over? or are there other institutional or structural changes which the economy need to undergo? some of the growth during the 1990s was probably a temporary effect of the economy making a recovery after having been so hard pressed at the beginning of the 1990s. this effect should have faded now, and it is therefore up to the labour force, technology and renewal to do the job of raising potential growth in the long term. there are two main methods of increasing growth : firstly, that more people work or more people work more, secondly that productivity is improved. when, for instance, new technology or new organisations are introduced, production can be rationalised and productivity increases. if the content of production changes through a renewal in the direction of products and services that demand a higher value on the global market, the value of production rises. when this occurs without a corresponding increase in the number of hours worked, it leads to higher productivity. during the 1970s and 1980s and a little way into the 1990s, sweden lost considerable ground in terms of real growth compared with other countries in the oecd region. according to an sns paper produced last year, if sweden had a growth rate of one whole percentage point over the average among the richest countries, it would take 17 years for us to regain our place among the ten richest countries in the world. if growth is going to increase through more people working, part of the large percentage of the adult population that is absent from working life for various reasons would have to work. today approximately 800, 000 full - time workers disappear from working life as a result of ill health. at the end of 2001, it was estimated that the number of persons who had been on sick leave for longer than one year amounted to 120, 000, which is almost three times the figure for 1997. the number of those on sick leave shorter than one year is also continuing to rise. the problems are accentuated by the fact according to stephen oliner and daniel sichel at the federal reserve in washington, the productivity trend has increased by one percentage point during the second half of the 1990s. half of this increase is a result of investments in it. economics council report 2001 : kluster. se. sweden in the new geographical economy 2001. 800 000 full - time posts is calculated on approximately 400 000 early