This raises a series of questions such as: how to optimize the size and use of international reserves while combining them with multilateral tools? How to strengthen resilience and avoid financial protectionism which may hide behind macroprudential policies? Indeed EMEs have accumulated international reserves, developed local currency bond markets to avoid currency mismatches and resorted to macroprudential tools or even capital controls. Multilateral responses have also been enhanced. Here, I should mention the scaling up of global safety nets, including the diversification of IMF lending facilities, and closer cooperation between central banks, through extensive dialogue and the agreement on a number of international swap lines. Today’s Symposium will close with a Panel on the future of the policy mix that could help address many of the policy challenges mentioned earlier. In particular, while central banks have clearly played a pivotal role in the global policy mix in recent years, they cannot deal with all problems by themselves. In other words, questions asked to the Panel may include to what extent central banking can help governments buy time, and for how long they can bridge financing while waiting for structural reforms to bear fruit. Indeed, central banking cannot replace decisive structural reforms, which are necessary both for increasing aggregate supply and demand and enhancing our economies’ resilience to shocks. However, I shall not stand in for the Panel and will thus shortly conclude this introduction by welcoming in advance the fruitful sharing of experience to which all of you will contribute today.
The delegation of monetary policy decisions to a central bank is underpinned by the need to create stable expectations concerning economic developments and by the favourable experiences of countries such as the US and Germany and the less favourable experiences of countries where interest rate changes have been decided on the basis of more short-term considerations. Delegation to a central bank promotes credibility, confidence and consistency because the central bank must adhere to the mandate laid down by the political authorities. Democratic governance is safeguarded by the government authorities, who define the mandate and assess the results. The mandate provides for professional judgment in a defined area. A year and a half ago, the Government and the Storting adopted new guidelines for economic policy, which stipulate annual spending of petroleum revenues over the central government budget equivalent to the expected real return on the Government Petroleum Fund. One of the aims is to answer the question of when petroleum revenues should be used. The uncertainty and the speculation surrounding central government spending of these revenues, which could have adverse effects on the mainland economy, can thereby be reduced. At the same time, the Government issued a new operational mandate for monetary policy. Norges Bank shall set the key rate with a view to maintaining low and stable inflation.