We called upon Marvin Goodfriend of Carnegie Mellon University to give his views on the optimum inflation rate, Frederic Mishkin of Columbia University to write about the policy of inflation targeting and to tell us to what extent it is truly a new phenomenon, and William White of  BIS Review 71/2007  1  the Bank for International Settlements in Basel to address the difficult question of whether price stability is really enough. Manfred Neumann from the University of Bonn was asked to provide an assessment of fixed and flexible exchange rate systems, Peter Kenen of Princeton University to give us his opinion on the need for foreign exchange reserves in flexible exchange rate systems, Martin Hellwig from the Max Planck Institute in Bonn to reveal his thinking on the co-existence of the Swiss franc and the euro, and Alexander Swoboda of the Graduate Institute of International Studies in Geneva to share his ideas with us on the reform of the international monetary system. This third section, which is aimed rather more than the first two sections at a specialised audience, is available in English only. The two other sections, meanwhile, are available in French, German, Italian and English. It only remains for me to that I hope you will find the book both engaging and interesting.
Over 26 million people are unemployed in the EU today, almost 10 million more than in 2007. Low growth, high unemployment and high debt levels are not a good combination. Even though there are signs of a moderate revival of activity abroad, growth may remain low for a protracted period. Real wage growth in Norway has diverged substantially from that observed in Germany and the US. This is attributable to the sharp price rise for Norwegian goods in recent years. Norway’s terms of trade have improved and the gains shared between owners and workers. The wage share has remained fairly stable. Chart 5: Real wages and productivity for mainland Norway Strong growth in activity in the petroleum sector has for many years been an engine of growth also for the mainland economy, generating high growth in output and employment. Since a share of the terms of trade gains has benefitted wage-earners in the form of wage increases, real wage growth in Norway has been considerably higher than productivity growth. But the economic picture for Norway may be changing. We cannot assume that Norway’s terms of trade will continue to improve. Investment in the petroleum sector is levelling off. Output growth in the mainland economy has slackened. When activity in the petroleum sector eventually declines, there will also be a need for economic restructuring in Norway. The business sector will have to seek new markets where competition may be intense. Restructuring may prove particularly demanding given Norway’s high cost level.