The operational target of monetary policy shall be annual consumer price inflation of close to 2.5 per cent over time. Low and stable inflation is now the guiding principle behind interest rate setting in most western countries. New Zealand was the first country to introduce an inflation target at the end of the 1980s. Many other countries have since followed suit. But even though inflation targeting is a relatively new phenomenon, the idea is not new. As early as the beginning of the 1900s, the Swedish economist Knut Wicksell proposed that the interest rate should be used to keep the value of money – the price level – stable. 8  7  Finn E. Kydland and Edward C. Prescott (1977): “Rules Rather than Discretion: The Inconsistency of Optimal Plans”, Journal of Political Economy, 85, nr. 3, pp. 473–491. 8  Knut Wicksell (1907): “The Influence of the Rate of Interest on Prices”, Economic Journal, XVII, pp. 213–220. BIS Review 109/2010  5  The shift in the Norwegian economy, combined with a generous dose of good luck, has resulted in two “golden decades”. The major structural reforms have led to more efficient use of labour and other resources. Developments in the Norwegian economy have been fairly stable. Unemployment has been low. We have also had luck on our side over the past decade. Prices for Norwegian export goods, such as oil and gas, metals, minerals, fish and freight, rose sharply.
Other elements were:   fiscal policy – the management of public spending and revenues – was oriented towards full employment    credit regulation within limits specified in a separate credit budget    channelling of loans through state banks    regulation of cross-border capital movements    low nominal interest rates stipulated by the government authorities    a fixed, though adjustable, krone exchange rate    use of price regulation    an active business policy through state ownership and state grants and subsidies. The proposal to establish an incomes policy council did not receive support. There was just too much state control and coordination. Today, 40 years later, little remains of the management system that was built after the war. The structure was not sufficiently robust. Detailed management and regulation of the economy was not able to deliver sustainable growth and welfare. On the contrary, the result was poor efficiency and wide fluctuations in the Norwegian economy in the 1970s and 1980s. The wide fluctuations culminated in a credit boom in the mid-1980s, which was followed by a banking crisis and a deep recession with high unemployment at the end of 1980s and the beginning of the 1990s. The way the economy is organised has changed considerably over the past 20–25 years. It would therefore be incorrect to say that one economic model has applied to Norway through the postwar period.