It is important to keep this in mind in any judgement of Rygg – that he took over an estate that had fallen into grave disrepair. The monetary and fiscal policy pursued during World War I had been lax to a degree that was completely unnecessary”. 12 Norges Bank now aimed to raise the value of the Norwegian krone and lower the price of gold by means of so-called “parity policy”. This line of approach was followed by most advanced economies to restore pre-war exchange rates. A system of stable and convertible currencies was regarded as essential to growth in global trade. Rygg moreover regarded restoring the value of the krone to its former gold parity as a moral obligation. 13 The Norwegian government held substantial debt in sterling and US dollars and he felt it was important to settle Norway’s debts in money of the same value as previously. The same applied to small depositors – they were to feel secure that their money would keep its value over time. 14 But the central bank also had a banking crisis to deal with. Funding was supplied, partly by Norges Bank and partly by the Treasury, to keep the banks afloat. It took time to restore confidence in the krone and for parity policy to be effective. It was not until May 1928 that the krone was pegged to gold at par.
34  At that time, little academic research was available on alternatives to a fixed exchange rate regime or money supply targeting. Leading politicians and economists were sceptical about the idea of abandoning the fixed exchange rate regime. Money supply targeting was regarded as out of the question because of instability in the money supply. John Taylor’s works on interest rate rules that could contribute to stabilising inflation and the real economy, through transparency and predictability, were not published until 1993 (Taylor, John B: “Discretion versus Policy Rules in Practice”, Carnegie-Rochester Series on Public Policy 39, 195-214). 35  Storvik, Kjell (1998) “Aktuelle økonomiske og pengepolitiske problemstillinger (Current economic and monetary policy issues)”. Lecture at Forex Norway, 28 August. Norges Bank was prepared for a change in regime, cf . the discussions in Choosing a Monetary Policy Target, Christiansen, A.B. and J.F. Qvigstad (Eds. ), Universitetsforlaget (1997) and Perspektiver på pengepolitikken (Monetary policy perspectives), Qvigstad, J.F. and Ø. Røisland (Eds. ), 2000. A workshop entitled “The Conduct of Monetary Policy in Open Economies” was also held at the Norwegian Academy of Science and Letters in October 2000. 36  Article in the newspaper Aftenposten on 5 January 1999 in connection with the appointment of Svein Gjedrem as governor of Norges Bank, lecture by Svein Gjedrem, Gausdal, 28 January 1999: “Utfordringer i den økonomiske politikken (Challenges to economic policy)” and article by Svein Gjedrem in Aftenposten 4 May 1999: “Utfordringer i pengepolitikken (Challenges to economic policy)”.