Krugman, Paul R. (1998). “It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap”. Brookings Papers on Economic Activity 49, 137-206. BIS Review 19/2009  3  inflation, the real economy and the repo rate, the central bank can affect expectations of inflation and future repo rates. Even if the real economy becomes weak and inflation low or even negative in the short term, the central bank can, with a good and convincing analysis, present forecasts in which inflation returns to the inflation target and the real economy stabilises. This means, all in all, that the central bank's forecasts and scenarios constitute central tools in the effort to influence inflation expectations. Central banks that already have well-established numerical inflation targets may therefore find it easier to hold up inflation expectations and create credibility for their policy. In countries that do not have a numerical inflation target it may be good to introduce such a target in a situation with a binding zero lower bound for the interest rate, although it would of course have been better to already have the inflation target established and credible before ending up in such a situation. Inflation targets do, however, have a disadvantage . Following a period of unwelcome low inflation below the inflation target, inflation targeting entails, as it is usually applied, that the central bank subsequently seeks to maintain a level of inflation in line with the target.
We have moved away from an economy marked by detailed regulations, devaluation cycles and national perspectives, to an economy with well-developed credit markets, deregulation and greater international openness. The total of all these changes should contribute, with some time lag, to what has now happened, that is, that growth and productivity are developing more strongly. My point is thus that we should not overestimate the significance of information technology on what has happened so far in the Swedish economy. The fact that things are now going well is probably more due to stability policies, structural reforms and international influences and less due to new technology. There are some people who claim that the vigorous Swedish IT sectors is a sign that no further structural reforms are needed in Sweden. Things are fine as they are. This is a rather dubious conclusion. The Swedish IT miracle is largely the result of three deregulation processes in Sweden. The deregulation of the domestic credit market, the abolition of foreign exchange controls and the deregulation of the telecom sector. This opened the way for the growth of the Swedish IT sector. Risk capital flowed in to new companies from Sweden and abroad. This is not a new economy - it happens every time that strictly regulated markets are opened up to competition. To be fair, however, it should be mentioned that there is a two-way relation between the new technology and the deregulation processes.