This would translate into an acceleration of wage and price inflation and unstable conditions in the foreign exchange market. The Petroleum Fund is designed to channel the revenues resulting from an increase in the oil price to the Fund for investment abroad, in order to prevent an increase in oil prices from influencing the budget. The increased revenues would thus not have an impact on the domestic economy, but be invested abroad through the Petroleum Fund. The current account balance and government budget surplus show that Norwegian consumption has adjusted to petroleum wealth by increasing net imports and by maintaining a budget deficit excluding petroleum revenues. At the same time some of the wealth is saved abroad to redistribute income between generations. This means that there has already been a gradual resource reallocation from the exposed to the sheltered sector. As long as consumption is fairly well adjusted to the expected level of the petroleum wealth, there may not be a need for substantial exchange rate movements in the near future to achieve further adjustment. 5. Stability of the Norwegian krone  Let us turn to the stability of the krone. People in the banking industry often suggest that the krone is a petro currency fluctuating widely with the price of oil. Is this the case, or has stabilisation policy been successful in Norway so far? Looking at the data, we note that the krone exchange rate has been fairly stable over time. Since 1986 the authorities have focused on stability of the krone exchange rate.
Conclusions  Oil and gas provide substantial wealth for the Norwegian economy, while fluctuations in the price of oil give rise to variations in the value of this wealth. Norwegian economic policy is organised so as to maintain stability in the face of these variations. Fiscal policy carries a responsibility for stabilising the real economy, while monetary policy is aiming at price stability and preventing a deflationary recession with a view to maintaining exchange rate stability over time. Changes in the price of oil may influence expectations about future economic development in Norway independently of how much of the petroleum revenues are absorbed into the economy in the short run. However, successful use of the Petroleum Fund will provide financial leeway for an active stabilisation policy, the redistribution of wealth between generations and to a large extent protect the Norwegian economy from oil price fluctuations. 15  BIS Review 121/1999