Our projections are based on the assumption that fiscal policy will provide some stimulus to aggregate demand and output in 2008 and 2009, but somewhat less than a mechanical application of the fiscal rule based on our oil price assumption would imply. High growth in the global economy has pushed up prices for non-oil commodities as well. Over the past year, copper prices have more than doubled and aluminium prices have risen by more than 60 per cent. Futures prices have also risen markedly, indicating expectations of a permanent upward revision of metals prices similar to the revision of oil prices. Rising commodity prices and buoyant activity in markets that are important for Norway have fuelled growth in the Norwegian economy, even though growth has been low in some of Norway’s most important export markets. Overall, prices for our imported goods are falling in relation to prices for goods we export. Norway’s terms of trade are improving. The impact of the rise in oil and gas prices is particularly strong, but the terms-of-trade gains for the mainland economy have also been high. The domestic economy is partly insulated thanks to the oil fund mechanism. The situation in Norway differs from that of its Nordic neighbour countries. Sales of Swedish and Finnish high-tech products are growing strongly in volume terms, but prices are falling. Denmark has a diversified business sector, which is overall moving on a steady path. 4  BIS Review 41/2006  Growth among our trading partners remains solid.
Our assessment however raised some important questions around how the system operates – particularly whether calling cash variation margin intraday can be made to work more effectively. The frequency and timing of these intraday calls, particularly when issued ad hoc, was not always sufficiently clear to all participants, further complicating liquidity management issues for some. In some instances, unexpected or late-in-the-day margin calls posed operational challenges to making timely payment for some participants. These challenges around the predictably of variation margin calls reflect a wider issue of transparency in the margining process. Most CCPs provide tools that allow clearing members and clients to calculate margin requirements for existing portfolios as well as changes to portfolios that participants expect to make. Some CCPs also provide additional functionality allowing participants to calculate margin requirements under “what if” scenarios. On the other hand, many banking and non-banking participants reported to us that margin calls were insufficiently predictable, with considerable uncertainty over the scale and the speed of increases they were likely to face over a given time period, or for a given level of volatility. Participants reported that the availability of more information on how the models are calibrated and the wider provision by CCPs of high quality margin calculators and other tools, would enable them to generate forward-looking predictions of margin requirements at portfolio level. The surveys also revealed a picture on whether market participants were prepared adequately for margin calls in a severe stress.