However, it is important to distinguish between the role of resource utilisation as a target variable and its role as an indicator of inflationary pressures. With regard to its role as target variable, it is the unemployment gap between the rate of unemployment and the sustainable rate that is relevant. But with regard to its role as an indicator of inflationary pressures and as a basis for forecasts for wages and inflation, various short-term situations, shortages and bottlenecks may be significant, but will not normally affect the sustainable rate of unemployment. One way of expressing this is to say that the unemployment gap in relation to the sustainable rate of unemployment is a target variable, but that the gap in relation to the short-term equilibrium rate of unemployment may be an indicator of inflationary pressures that is important in forecasting the inflation gap, the other target variable. The most recent decision The reason I chose to enter a reservation against the repo-rate path chosen by the majority at the latest monetary policy meeting is that, in my opinion, it does not represent a wellbalanced monetary policy. This is because the repo-rate path adopted by the majority entails a CPIF forecast under the target and an unemployment forecast higher than a reasonable sustainable rate throughout almost the entire forecast period. I believe that target attainment can be improved for both inflation and unemployment with a lower repo-rate path.
The United States also has substantial structural current account and budget deficits. Sweden has been exposed to a major demand shock with a collapse of exports and a loss of demand in the export sector. Exports are now recovering again. Sweden does not appear to have any structural problems in the finance sector, or in any other sector, and has no structural budget or current account deficits. This being the case, I think one could claim that the development of Sweden’s potential GDP should in fact be better than that of the United States, not worse. The difference in potential GDP underlines the difficulties and the element of arbitrariness in these calculations. Figure 6 compares the Riksbank’s estimates and forecasts for potential GDP from two different points in time, namely September 2008 shortly before the investment bank Lehman Brothers went bankrupt and February 2011. The September 2008 forecast for Sweden’s potential GDP is rather similar to the CBO’s latest forecast for potential GDP in the United States in Figure 5. We can see in Figure 6 that the February 2011 assessment of potential GDP in the longer term is approximately 4 per cent below the corresponding assessment in September 2008. Why should a pure demand shock in the absence of structural problems lead to such a significantly lower potential GDP in the longer term?