The basic problem was that our models do not capture the various financial links that played a major role during the financial crisis, and we therefore underestimated the risks. You might think that in such situations we should tone down the model analysis and instead rely on assessments of various indicators, which in fact the Riksbank did, but we could have performed better here too. We made substantial downward revisions in the figures for GDP, but we did not expect the fall to be as great as it actually was. When assessing GDP during the fourth quarter of 2008 we should, in my opinion, have attached more weight to the alarm signals that came from our company interviews, especially as data from the business tendency surveys, the statistics on redundancy notices and falling share prices all pointed in the same direction. On the other hand, the underestimation of the fall in GDP did not affect  9  See the minutes of the Executive Board's monetary policy meeting from 10 February 2009. BIS central bankers’ speeches  9  the conduct of monetary policy as the repo rate was still reduced substantially, by several percentage points, over a short period of time. Nor do I believe that the conduct of a less restrictive monetary policy earlier in 2008 would have had much effect on the course of the crisis. That is not the point. The point is that the misjudgements made by the Riksbank were partly due to shortcomings in the analysis.
We also conduct our own company interviews in which we get direct information on how various submarkets are functioning in practice. The indicators often provide a slightly diffuse picture of the state of the economy. Here we find various indicator models useful in that, on the basis of an analysis of the historical significance of different indicators, they help us to put our most important forecasts into figures. Ultimately, we also have to weigh information that is not captured by our indicators into our assessment of the current state of the economy. Model forecasting is the next step Once we have produced a forecast for the outlook abroad and performed an assessment of the current situation we are ready, with the help of various large macro models, to produce forecasts for longer time horizons. It could be said that the models give a description of how prevailing impulses from abroad and the initial state of the Swedish economy will affect the development of the economy. In the very long term, however, the effects of the prevailing impulses will have faded and the economy will then follow a balanced path in the long run. This balanced state, which in model terms is often called a steady state, is an important characteristic of a model. We could perhaps say that an assessment of the current situation tell us where we are while models tell where we are going in the very long term.