SPEECH DATE:  13/11/2019  SPEAKER:  Deputy Governor Martin Flodén  VENUE:  Örebro University and Kommuninvest, Örebro  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  Monetary policy in a changing world* Over the past year it has become increasingly clear that economic growth is slowing down, both in Sweden and abroad. It is not surprising that growth is slightly lower than during the strong years 2014-2018. But there have recently been increasing signs that the slowdown will be larger and occur faster than we at the Riksbank have been expecting. To determine how monetary policy should react to this, we need to understand why growth is falling. Is it due to weaker cyclical economic activity, or to deeper, structural changes in the economy? Today I intend to first briefly discuss some structural changes that may have had significance for economic developments in recent years. These are changes that may have entailed lower underlying interest rates and growth and lower inflationary pressures, and which may affect the conditions for the Riksbank's work going forward. After that, I will say a few words about the possibilities open to monetary policy if economic developments become weaker than we have forecast. In conclusion, I would like to say a few words about climate change, one of the structural changes that affects the way the economy functions.
Some of the changes are unavoidable, for instance because of technological advances. Other changes are due to political choices and priorities. 1  See Sveriges Riksbank (2019). 2 In the United Kingdom, yields on 10-year real government bonds have fallen from 3.5 per cent on average in  1985-1999 to -0.9 per cent in 2010-2019. The development has been similar in other countries, including the United States and Sweden. 3 In Sweden, annual productivity growth has fallen from an average of 2.6 per cent a year in 1998–2007 to 1.0 per cent in 2010–2018. 2 [7]  But the structural changes affect the conditions for monetary policy. The low real interest rates have reduced the scope for monetary policy to manage economic fluctuations. Policy rates in many countries cannot be cut much from the current levels. The possibilities to push down interest rates with further quantitative easing are limited. If policy cannot be made more expansionary in other ways, the structural changes, combined with a normal economic downturn may lead to the economies getting stuck in a situation with unnecessarily low growth. 4  Fiscal policy will play a larger role in stabilisation policy In the debate, and especially internationally, many suggestions have been put forward on how to make monetary policy more expansionary with other means. There is talk of coordinating fiscal and monetary policy, “helicopter money”, “modern monetary theory” and the purchase of specific private assets.