3  Because Swiss GDP statistics do not fully take into account the improvement of the terms of trade regularly realized by the tradable sector, the growth differential between Switzerland and other advanced economies is overstated but remains significant nevertheless. See e.g., Term-of-Trade Changes and Real GDP: Evidence from Switzerland, Ulrich Kohli, SNB Quarterly Bulletin, June 2002. BIS Review 24/2004  3  Monetary policy and EMU Accession to a monetary union transfers the power over monetary policy from the national to the union level. There are costs and benefits to such an abdication of monetary sovereignty. Nominal interest rates are equalized throughout a monetary union and the nominal exchange rate is no longer available as a tool for alleviating the impact of asymmetric shocks. Necessary economic adjustments between different countries of a monetary union must therefore occur through various price and factor movements. As I have already suggested, imposing real wage adjustments in particular can be politically costly. In the case of both the UK and Switzerland, these potential costs of EMU membership are mitigated by virtue of flexible labor markets in both countries. In the case of Switzerland, EMU accession would also lead to the loss of an interest rate bonus our country has traditionally enjoyed. At least partly, this bonus is rooted in the credibility of the Swiss National Bank, acquired over a long period of independent and successful monetary policy (Chart 2).
A similar situation has not been seen since World War I when earnings in the shipping industry and other export  1  See also the analysis in Norges Bank Watch 2007. BIS Review 47/2007  5  industries were exceptionally high for a period. Norway’s disposable income increased in real terms by 30 per cent from 2003 to 2006. Second, an ample supply of labour has boosted output growth. In particular, the supply of foreign labour has increased sharply after EU enlargement in 2004. Over the past two years, these labour inflows have accounted for over 30 per cent of growth in the labour force in Norway. At the same time, this has enabled Norwegian companies to be bolder in accepting new assignments and investing knowing that they can procure labour throughout Europe. In addition to increased labour inflows from Poland, Lithuania and other central European countries, we have long benefited from inflows of labour from Sweden. Many workers are on temporary assignment and their consumption is primarily concentrated in their home country. The Norwegian economy has seen a net capacity increase. Third, the Norwegian business sector has been quick to integrate new technology. This applies both to companies competing on international markets and those supplying goods and services to the domestic market. In comparison with other countries, it is particularly productivity gains in banks and other service sectors that stand out. Examples are automated processes and swifter payments in the financial industry and improved inventory and management systems in commerce and transport.