The very high growth figures for productivity during the latter part of the 1990s reflected both the macroeconomic stabilisation, an expansion in the private sector relative to the public sector, and in particular the IT expansion. It is unlikely that the development will continue in the same way in the future. However, we know that productivity growth has been surprisingly high in recent years. Many economists are busy working on the question of which factors lie behind this development. It is clear that, unlike the 1990s, it is not a question of high productivity growth in the IT sector and major investment in IT. One theory that has been put forward is that it may perhaps be explained by delayed effects in other sectors of earlier IT investment; that it has quite simply taken time for companies to adjust and to take advantage of the new technology. It is thus difficult to say anything about the durability of the most recent development. However, there are many indications that the long-term increase in productivity now is higher than it was during the 1980s. The widespread structural changes that took place during the 1990s are also an indication of this. Nor should it be forgotten, that the labour force is better educated today than it was ten years ago, particularly with regard to the percentage of those with a university education. There are studies indicating that the improvement in qualifications has also contributed to the growth in productivity.
If actual and potential output coincide so that the output gap is closed, inflation is in line with the Riksbank’s target of 2 per cent, assuming that there is confidence in the policy conducted. This means at the same time that the size of potential growth affects the scope for conducting monetary policy. The higher the long-term sustainable growth rate, the higher the actual growth rate can be without resource utilisation becoming so high that inflation takes off and the Riksbank is forced to intervene to subdue demand. This reasoning is of necessity somewhat simplified. In actual fact, temporary shocks to inflation can occur that lead to inflation not being on target, despite the fact that actual and potential output are at the same level. However, in this case, inflation is in practice probably close to the target, so a more realistic description is therefore that the target on average is met when the output gap is closed. Moreover, monetary policy affects demand with some lag. Consequently, the Riksbank adjusts the interest rate in accordance with forecasts of inflation a couple of years ahead. During this period shocks can of course occur in the economy that couldn’t be foreseen at the time of the forecast. We therefore attempt to avoid excessive fluctuations in the economy by gradually bringing inflation back towards the target. Thus, in the short term, the Riksbank can affect output and employment by adjusting the interest rate, thereby stimulating or cooling down economic activity.