Most things suggest that traditional demand policy is not capable of lowering unemployment appreciably. Most economic observers also expect that even with decent growth, unemployment will remain high in the coming years. Whatever the causes of the high unemployment, an important key to turning this tendency lies in the functioning of the labour market. I have not considered conceivable specific measures, such as stimulating private sector employment, contributing to efficient wage formation and encouraging individuals to look for and accept jobs and maintain and develop their competence. I believe that, as Assar Lindbeck pointed out recently,10 the problem of unemployment in Sweden and, indeed, in the whole of Western Europe has to do with a great many factors connected with how the labour market functions. Although the most effective measures cannot be identified for certain in advance, the central concern is the workings of the labour market and thereby also the labour market organisations. This applies to employer and employee representatives alike. The climate in the labour market will be of significance for the possibility of bringing the high unemployment down. One issue is whether a mood of mutual understanding can be created so that employment has priority in wage setting. An important lesson seems to be that Sweden ought not to opt for a standard in wage formation that matches the average level in Western Europe; such a relatively high level could impede a reduction of unemployment. The model should rather be the Netherlands.
Other notable factors are the structure of the population, new housing construction and access to loans. Regardless of what it is that generates an increase in house prices, this probably stimulates household consumption via the wealth effect, just as a house price fall has the opposite effect. An increase in the value of houses and tenant-owned apartments can be realised in part by using the property as loan collateral. If this happens when interest rates are low, households will be more interested in mortgaging the increased value of their property in order to buy durable goods such as cars and household appliances, for example. House prices therefore have significance for demand and thereby for monetary policy. The lending potential and interest rates of banks and mortgage institutions are also important. Access to loans increases the chances of realising an increase in value but also makes it possible to finance a house purchase. In addition to the inflation target, the Riksbank has the task of promoting finan-cial stability, which is a prerequisite for a proper implementation of monetary policy. A functional payment system, capital supply and arrangements for spreading risks are a precondition for the efficient working of the economy in general. An important instrument for the Riksbank’s work on stability is the twice-yearly publication of a report that evaluates the risks in the financial system. Lending to households and the development of house prices have been recurrent themes in the Financial Stability Report in recent years.