The impact on the Danish economy has therefore been more limited. BIS Review 81/2008  3  Nordic countries. The growing number of people outside the labour force and on benefits is increasingly becoming the Achilles’ heel of the Norwegian economy. On balance though, the picture is fairly positive: We have managed to keep macroeconomic developments on a steady course, we have avoided dramatic changes in industry structure, and we use our resources fairly efficiently. It is, however, too early to draw definite conclusions. We probably have to wait another generation or two to see the long-term impact of this huge windfall. The debate on sovereign wealth funds Let me wind up with a few words on the sovereign wealth funds debate. Typical features of many sovereign wealth funds are long investment horizons, no leverage and no claims for the imminent withdrawal of funds. This differentiates such funds from for instance the rising number of leveraged funds and investors with short time horizons. Hence, sovereign wealth funds have a strong risk-bearing capacity and an ability to accommodate short-term volatility. Sovereign wealth funds may reduce volatility in asset prices and increase efficiency. Again, transparency and disclosure of information is an important tool in building confidence. This runs both ways, of course.
Since 2005, we have published a projection of the future path of our key policy rate. This path reflects our view on the role of monetary policy. We consider an interest rate path to be appropriate when it meets three criteria. First, the interest rate should be set with a view to stabilising inflation at our 2.5 percent target. Second, the interest rate path should provide a reasonable balance between the path for inflation and the path for overall capacity utilisation. This implies that inflation targeting is flexible. Notwithstanding new macroprudential tools, we see a need to add a third criterion: The interest rate should be set so that monetary policy leans against a build-up of financial imbalances. At Norges Bank, we remain firmly committed to our flexible inflation targeting framework. But the global financial crisis has taught us to be both modest and inquisitive. Experience with new macroprudential policy tools is limited, and institutional frameworks are still in the making. Leaning against financial winds remains subject to debate. It is therefore important that we actively seek knowledge. It is our obligation as central bankers to continuously search for the best practice for monetary policy. And we do not have to agree with Friedman's prescriptions to revisit the important questions he posed. We are privileged to have such a distinguished group of central bankers and academics present at this conference to help us with this task.