Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Monetary policymaking in Norway

10.03.2006


The interest rate setting in the past 2-3 years has contributed to a strong development of the Norwegian economy. Now, the issue is when and by how much monetary policy should be tightened, concludes “Norges Bank Watch 2006”, published by BI The Norwegian School of Management.



The Centre for Monetary Economics (CME) at the BI Norwegian School of Management has for the seventh time invited a committee of leading economists for Norges Bank Watch with the objective of evaluating monetary policy in Norway. The Norges Bank Watch 2006 Report was released on 9 March 2006. The report was commented by Norges Bank Governor Svein Gjedrem.

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. Norway adopted an inflation target for the monetary policy five 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.

After five years with a new regime, a brief summing up might be in order. How does inflation targeting work, compared to what we expected?

Overall, monetary policy in Norway is quite successful. The interest rate setting in the past 2-3 years has contributed to a strong development of the Norwegian economy, without sacrificing price stability. Now, the issue is when and by how much monetary policy should be tightened, to avoid an excessive stimulation of the economy.

Since the adoption of an inflation target five years ago, Norges Bank has been determined to learn and improve, as well as to being open and transparent. The Bank’s policy, analysis and communications have developed and improved over time.

The Regulation on Monetary Policy should be interpreted in a forward-looking way, and past inflation discrepancies should not be compensated for in the future. Thus, the current policy strategy, which aims to take inflation gradually up towards the 2.5 percent target, does not violate the Regulation, even if it involves inflation considerably below the operational target for six consecutive years.

The Norwegian economy is currently into its third year of above-trend growth. Most sectors of the economy are expanding, some quite rapidly. Labour demand is picking up, and unemployment is very close to historic lows. While wage and price inflation thus far remain low, the present situation calls for somewhat tighter monetary policy than what Norges Bank currently indicates. High credit and asset price growth strengthen this view.

We believe that there is greater risk involved by hiking too little, too late, than by hiking too much, too early. In the latter case, it is relatively easy to reverse policy. In the former case, the longer one waits, the greater the likelihood that one has to tighten in greater steps, contrary to what the bank itself sees as a good way of setting interest rates, concludes the Norges Bank Watch’ economists.

Audun Farbrot | alfa
Further information:
http://www.bi.no/templates/NyhetsArtikkel____37844.aspx

More articles from Transportation and Logistics:

nachricht Tool helps cities to plan electric bus routes, and calculate the benefits
09.01.2017 | International Institute for Applied Systems Analysis (IIASA)

nachricht Realistic training for extreme flight conditions
28.12.2016 | Technical University of Munich (TUM)

All articles from Transportation and Logistics >>>

The most recent press releases about innovation >>>

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

Im Focus: Deep inside Galaxy M87

The nearby, giant radio galaxy M87 hosts a supermassive black hole (BH) and is well-known for its bright jet dominating the spectrum over ten orders of magnitude in frequency. Due to its proximity, jet prominence, and the large black hole mass, M87 is the best laboratory for investigating the formation, acceleration, and collimation of relativistic jets. A research team led by Silke Britzen from the Max Planck Institute for Radio Astronomy in Bonn, Germany, has found strong indication for turbulent processes connecting the accretion disk and the jet of that galaxy providing insights into the longstanding problem of the origin of astrophysical jets.

Supermassive black holes form some of the most enigmatic phenomena in astrophysics. Their enormous energy output is supposed to be generated by the...

Im Focus: A Quantum Low Pass for Photons

Physicists in Garching observe novel quantum effect that limits the number of emitted photons.

The probability to find a certain number of photons inside a laser pulse usually corresponds to a classical distribution of independent events, the so-called...

Im Focus: Microprocessors based on a layer of just three atoms

Microprocessors based on atomically thin materials hold the promise of the evolution of traditional processors as well as new applications in the field of flexible electronics. Now, a TU Wien research team led by Thomas Müller has made a breakthrough in this field as part of an ongoing research project.

Two-dimensional materials, or 2D materials for short, are extremely versatile, although – or often more precisely because – they are made up of just one or a...

Im Focus: Quantum-physical Model System

Computer-assisted methods aid Heidelberg physicists in reproducing experiment with ultracold atoms

Two researchers at Heidelberg University have developed a model system that enables a better understanding of the processes in a quantum-physical experiment...

Im Focus: Glacier bacteria’s contribution to carbon cycling

Glaciers might seem rather inhospitable environments. However, they are home to a diverse and vibrant microbial community. It’s becoming increasingly clear that they play a bigger role in the carbon cycle than previously thought.

A new study, now published in the journal Nature Geoscience, shows how microbial communities in melting glaciers contribute to the Earth’s carbon cycle, a...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Expert meeting “Health Business Connect” will connect international medical technology companies

20.04.2017 | Event News

Wenn der Computer das Gehirn austrickst

18.04.2017 | Event News

7th International Conference on Crystalline Silicon Photovoltaics in Freiburg on April 3-5, 2017

03.04.2017 | Event News

 
Latest News

New quantum liquid crystals may play role in future of computers

21.04.2017 | Physics and Astronomy

A promising target for kidney fibrosis

21.04.2017 | Health and Medicine

Light rays from a supernova bent by the curvature of space-time around a galaxy

21.04.2017 | Physics and Astronomy

VideoLinks
B2B-VideoLinks
More VideoLinks >>>