Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

The Norges Bank Watchers

28.02.2007
The Norwegian economy presents some unique challenges for monetary policy, conludes Norges Bank Watch 2007, an independent review of monetary policymaking in Norway, published by BI Norwegian School of Management.

Centre for Monetary Economics (CME) at the BI Norwegian School of Management has for the eight time invited a committee of leading economists for Norges Bank Watch with the objective of evaluating monetary policy in Norway.

The Norges Bank Watch 2007 which this year has been undertaken by a trio of experienced macroeconomists, Marvin Goodfriend of Carnegie Mellon University, Knut Anton Mork of Handelsbanken Capital Markets, and Ulf Söderström of Bocconi University, was released on 19 February 2007.

The report was commented by Norges Bank Governor Svein Gjedrem.

New monetary regime

The main task of the committee has been to evaluate how well Norges Bank has fulfilled its monetary policy mandate given by the Norwegian Government. The committee should also evaluate the communication strategy of Norges Bank.

Norway adopted an inflation target for the monetary policy six years ago, in March 2001. Although some countries had pursued inflation targeting for many years, this type of monetary regime was still in its infancy.

Norges Bank operates a flexible inflation target, where weight is given both to low and stable inflation, and to stable output and employment.

The Norwegian case

The Norwegian economy presents some unique challenges for monetary policy, not only because it is smaller and more open than most, but also because of the many supply shocks that the country has experienced in recent years, such as the rise in oil prices, the sharp decline in the prices of imported consumer goods, the substantial inflow of foreign workers, and important productivity improvements in key sectors.

This contrasts with the common emphasis on demand shocks in monetary-policy studies and serves as an important reminder that the objective of monetary policy is not to prevent business-cycle fluctuations, but to help the economy attain its full potential. In the presence of supply shocks, this potential does not develop smoothly over time, but is itself subject to fluctuations.

“Norges Bank appears to have managed monetary policy well in 2006. However, we see considerable scope for improving the framework within which Norwegian monetary policy is conducted”. This is the main conclusion of Norges Bank Watch 2007.

Reduce the inflation target

Norges Bank Watch 2007 makes the following recommendations (a selection of recomandations is given. Read executive summary and full report):

In particular, references to the exchange rate should be removed from the Regulation on Monetary Policy; the inflation target should be reduced from 2.5% to 2%, which has become the de facto international standard; and the inflation target should be defined more precisely in terms of a core index covering those consumer goods and services that are most subject to price stickiness. The central bank and the government should explore the potential for an index of domestically-produced non-energy goods and services, adjusted for indirect tax changes, to serve this purpose.

The report encourages the Bank to communicate even more effectively with the public, by releasing minutes from its policy meetings, with public policy statements by all Board members, by making available in a timely manner ex ante information employed in its policy decisions, and by being quantitatively more explicit about the role of judgment in conjunction with models in its reasoning.

The report recommends that Norges Bank strengthen its research on issues regarding the openness of the economy and on price and wage stickiness in Norway.

Audun Farbrot | alfa
Further information:
http://www.bi.no/cme

More articles from Business and Finance:

nachricht Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)

nachricht Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Fizzy soda water could be key to clean manufacture of flat wonder material: Graphene

Whether you call it effervescent, fizzy, or sparkling, carbonated water is making a comeback as a beverage. Aside from quenching thirst, researchers at the University of Illinois at Urbana-Champaign have discovered a new use for these "bubbly" concoctions that will have major impact on the manufacturer of the world's thinnest, flattest, and one most useful materials -- graphene.

As graphene's popularity grows as an advanced "wonder" material, the speed and quality at which it can be manufactured will be paramount. With that in mind,...

Im Focus: Exotic quantum states made from light: Physicists create optical “wells” for a super-photon

Physicists at the University of Bonn have managed to create optical hollows and more complex patterns into which the light of a Bose-Einstein condensate flows. The creation of such highly low-loss structures for light is a prerequisite for complex light circuits, such as for quantum information processing for a new generation of computers. The researchers are now presenting their results in the journal Nature Photonics.

Light particles (photons) occur as tiny, indivisible portions. Many thousands of these light portions can be merged to form a single super-photon if they are...

Im Focus: Circular RNA linked to brain function

For the first time, scientists have shown that circular RNA is linked to brain function. When a RNA molecule called Cdr1as was deleted from the genome of mice, the animals had problems filtering out unnecessary information – like patients suffering from neuropsychiatric disorders.

While hundreds of circular RNAs (circRNAs) are abundant in mammalian brains, one big question has remained unanswered: What are they actually good for? In the...

Im Focus: RAVAN CubeSat measures Earth's outgoing energy

An experimental small satellite has successfully collected and delivered data on a key measurement for predicting changes in Earth's climate.

The Radiometer Assessment using Vertically Aligned Nanotubes (RAVAN) CubeSat was launched into low-Earth orbit on Nov. 11, 2016, in order to test new...

Im Focus: Scientists shine new light on the “other high temperature superconductor”

A study led by scientists of the Max Planck Institute for the Structure and Dynamics of Matter (MPSD) at the Center for Free-Electron Laser Science in Hamburg presents evidence of the coexistence of superconductivity and “charge-density-waves” in compounds of the poorly-studied family of bismuthates. This observation opens up new perspectives for a deeper understanding of the phenomenon of high-temperature superconductivity, a topic which is at the core of condensed matter research since more than 30 years. The paper by Nicoletti et al has been published in the PNAS.

Since the beginning of the 20th century, superconductivity had been observed in some metals at temperatures only a few degrees above the absolute zero (minus...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Call for Papers – ICNFT 2018, 5th International Conference on New Forming Technology

16.08.2017 | Event News

Sustainability is the business model of tomorrow

04.08.2017 | Event News

Clash of Realities 2017: Registration now open. International Conference at TH Köln

26.07.2017 | Event News

 
Latest News

Gold shines through properties of nano biosensors

17.08.2017 | Physics and Astronomy

Greenland ice flow likely to speed up: New data assert glaciers move over sediment, which gets more slippery as it gets wetter

17.08.2017 | Earth Sciences

Mars 2020 mission to use smart methods to seek signs of past life

17.08.2017 | Physics and Astronomy

VideoLinks
B2B-VideoLinks
More VideoLinks >>>