However, it is not our assessment that the reliance on a fixed exchange rate and occasional discretionary fiscal policy measures in itself has exacerbated this inherent problem. Quite the contrary, the fixed-exchange-rate policy has been instrumental in the significant improvement in Danish economic policy that has taken place in the last 10-15 years.
The Danish government, supported by a large majority in the Danish parliament, is committed to use fiscal policy if inflationary developments are out of line with the exchange-rate policy. It has been publicly announced that fiscal policy will be adjusted if inflation deviates from the ECB’s definition of price stability (0-2 pct. increase in the harmonised index of consumer prices - HICP).