are eaten up by inflation and real wage increases prove to be a disappointment year after year. the fact that inflation has been lower and more stable during the period with inflation - targeting policy is a good result, although perhaps not surprising. what may have received less attention and been less evident, given the theories in this field, is that there has been less fluctuation in the real economy. it thus appears as though the new regime has also had a beneficial effect on the stability of the real economy. now that it appears as though the more fundamental stabilisation policy problems have been managed, it may seem natural to gradually become more ambitious and wonder if things could function even better. however, it is important to have realistic expectations as to what the stabilisation policy can achieve. it has been easy to gain an impression in the recent debate that there are expectations that the fluctuations in both inflation and the real economy – perhaps especially the latter – can be eliminated entirely. when the heads of the national labour market board make comparisons with a situation where unemployment is always around 4 per cent and then claim that the riksbank bears the responsibility for the difference, they appear to be expressing this view. it is unavoidable that the economy and inflation undergo rapid changes from time to time that cannot be predicted or fully counterbalanced in the short term. no central bank – or any other economic policy decision - maker – can thus steer inflation and economic activity completely in the long term. in actual fact, experiences show there is a substantial risk that actively fine tuning stabilisation policy can reinforce fluctuations in the economy. it may be worth noting in this context that the rise in unemployment we have observed in sweden during the most recent economic downswing does not in any way appear remarkable from an international perspective. it is also extremely difficult to know what comprises a “ normal ” rate of unemployment, particularly as this is also something that changes over time. it is important that the riksbank does not commit itself too strongly to a particular figure. we must be willing to test our way forward and if there is sufficient confidence in our policy, we must be prepared to question old truths. however there is reason to be sceptical of those who think they have infallible answers in this field. so, if i may modify my response to the question : yes, stabilisation policy is important, but one should not overestimate what it can achieve. the surprisingly weak development in the labour market is of

both fiscal policy and monetary policy would be forced to make substantial departures from the normal principles. these would be extremely unusual circumstances, however, and do not provide any argument for setting up a permanent stabilisation policy committee. so, my answer to the question on whether monetary and fiscal policy should be developed is yes, but not in the direction lo appears to have in mind. with regard to monetary policy, this means continued improvement of analysis and forecasting methods and to find ways to clarify the balance between the inflation target and the real economy. for fiscal policy it could mean finding ways to make the automatic stabilisers even more effective, but primarily it entails designing preventive systems to enable smoother structural adjustments in the economy when various shocks unavoidably occur. it does not entail any changes in the fundamental role allocation as regards stabilisation policy. summary let me briefly summarise my responses to the three questions. stabilisation policy is important, but one should not overestimate what it can achieve. other economic policy measures are much more important to long - term growth in prosperity. a smoother adjustment process when the economy suffers shocks could benefit employment more than an active stabilisation policy. the allocation of roles between fiscal policy and monetary policy with regard to stabilising the macro economy has functioned well in the new regime and i see no good reason to change it. both fiscal policy and monetary policy can and should develop, but this should occur within the framework of the present allocation of roles regarding stabilisation policy. for monetary policy this is a question of analysing and describing the considerations made between the inflation target and developments in the real economy. the most important issue regarding fiscal policy is not measures aimed at stabilisation, but providing a good general foundation for prosperity growth. thank you!