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Productivity and monetary policy Deputy Governor Svante Öberg Juni 2007

Productivity and monetary policy Deputy Governor Svante Öberg Juni 2007. Main message. The rapid increase in productivity is the most important explanation for the low inflation in recent years. But productivity will increase more slowly in future.

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Productivity and monetary policy Deputy Governor Svante Öberg Juni 2007

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  1. Productivity and monetary policyDeputy Governor Svante ÖbergJuni 2007

  2. Main message • The rapid increase in productivity is the most important explanation for the low inflation in recent years. • But productivity will increase more slowly in future. • Combined with higher wage increases, this indicates higher inflationary pressures and thereby a higher interest rate over the coming years.

  3. Three important questions • The reasons behind the strong productivity increase • Developments in productivity over the coming years • The significance of productivity for monetary policy

  4. Productivity in the business sectorAnnual percentage change Sources: Statistics Sweden and the Riksbank

  5. The inflation outcome and inflation in the absence of shocks to productivity growth according to the Riksbank’s macroeconomic modelAnnual percentage change Sources: Statistics Sweden and the Riksbank Note: UND1X inflation.

  6. Productivity in the business sectorAnnual percentage change, 8-quarter moving average Sources: Statistics Sweden and the Riksbank

  7. Structural changes • Deregulated markets • Globalisation • IT – production and use

  8. Productivity in the business sectorAnnual percentage change Note. Data are seasonally and day adjusted Sources: Statistics Sweden and the Riksbank

  9. TFP Other capital IT-capital Productivity contribution, entire economyAnnual percentage change Source: M. P. Timmer, G. Ypma and B. van Ark (2003), "IT in the European Union: Driving Productivity Divergence?", GGDC Research Memorandum GD-67 (October 2003), University of Groningen, Appendix Tables, updated June 2005.

  10. Labour productivity, entire economyAnnual percentage change Note. Outcome and forecast according to Monetary Policy Report February 2007. Sources: Statistics Sweden and the Riksbank

  11. Main message • The rapid increase in productivity is the most important explanation for the low inflation in recent years. • But productivity will increase more slowly in the future. • Combined with higher wage increases, this implies higher inflationary pressures and thereby a higher interest rate in the coming years.

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