the development of e-economy, since such economy may benefit most from the process of globalization. There are numerous examples of such actions taken by many governments, and this problem has been discussed in more detail in my recent speech at the Congress of e-Economy. The text of the speech is available on the NBP website: www.nbp.pl → publications → speeches and lectures. In today’s speech, I will try to present the reasons why the economic policy must not only take into consideration the process of globalization and adjust accordingly but also why it must be conducted in a way that enables to take the chance that globalization gives to the Polish economy. It applies especially to various aspects of the labour market, such as the education system, the role of the labour market institutions, including that of trade unions, its mobility and flexibility as well as to the aforesaid creation of favourable conditions for the growth of innovation. 1  Newsweek, 17 October 2005. 2  Aguiar M. et al. “The New Global Challengers. How 100 Top Companies from Rapidly Developing Economies Are Changing the World”, The Boston Consulting Group, May 2006. BIS Review 64/2006  1  Demographic changes A discussion on the global labour market must be commenced with a presentation of the demographic trends. Over the past fifty years, demographic factors had a significant influence on labour markets, and these changes will go even further in the next fifty years.
At present, there are changes taking place in the global economy that will change the situation to some extent. Global GDP growth is on the rise, particularly in industrialised countries. Commodity prices are rising, and inflation in industrialised countries appears to be increasing as well. Interest rates have been raised in the US, and the period of very low or even negative interest rates in the euro area may be coming to an end. This has various effects on the Icelandic economy. It is not a given that terms of trade will continue to improve, and imported deflation will subside as well. Domestic inflation could therefore rise above target more quickly unless domestic pressures ease commensurably. On the other hand, the interest rate differential with abroad will narrow, other things being equal, and this will make the conduct of monetary policy less difficult and reduce the Central Bank’s accounting loss due to the foreign exchange reserves, as I will discuss more fully in a moment. Monetary policy conduct is generally much more complicated during times of significant change than under calmer conditions. The signposts of the policy – such as equilibrium interest rates, output, unemployment, and the exchange rate – could begin to move. However, because these variables are not observable but must be derived from developments in other variables, it is highly uncertain at any given time how much they have changed once they start to move.