Exports of other commodities add to the vulnerability of our economy to terms of trade shocks.3 The total commodity-related share of exports has risen from less than 40 percent in 1978 to a good 65 percent in 2012. Rules-based fiscal policy We know that commodity producing countries tend to experience pronounced economic cycles. However, as noted by Jeffrey Frankel (2011)4, this can be reduced through wellchosen regimes for fiscal and monetary policy: “We need to set up regimes ex ante which are more likely to deliver the right result ex post, in a world inhabited by human beings, not angels.” In Norway, the act of parliament relating to the oil fund, passed in 1990, provided a new framework for fiscal policy. The policy guidelines were clarified in 2001, and rules governing the interaction between Norway’s petroleum wealth and fiscal policy were established. These rules state: Chart: The Government Pension Fund Global and the fiscal rule  2  For more information about the Norwegian petroleum sector, see “Facts 2012: The Norwegian petroleum sector”, Ministry of Petroleum and Energy, http://www.regjeringen.no/en/dep/oed/documents-andpublications/Reports/2012/facts-2012-the-norwegian-petroleum-secto.html?id=714606. 3  Using a factor-augmented vector autoregressive (FAVAR) model that allows them to distinguish between different groups of countries, Aastveit et. al (2012) find that demand from emerging economies (most notably from Asian countries) is more than twice as important as demand from developed countries in accounting for the fluctuations in the real price of oil and in oil production. See Aastveit, Knut Are, Hilde C. Bjørnland and Leif Anders Thorsrud (2012): “What drives oil prices?
In January, the Bank forecast that inflation would average 2.6 percent between 1997 and 1998, and 2.3 percent in the course of the year. It seems clear that inflation during the first quarter of this year has been lower than expected in January. Government Finances In 1997, the Treasury recorded a welcome surplus of 1.3 billion kronur on a cash basis despite tax cuts, a rise in the wage bill and special interest payments associated with government bond redemptions. In order to compare the outcome with the budget it is necessary to exclude the special interest payments of 3.5 billion kronur. Thus adjusted, the Treasury’s surplus was 4.7 billion kronur. A Treasury surplus had not been recorded since 1984. On an accrual basis, which includes accrued interest and pension liabilities, the Treasury’s finances appear to have been close to balance in 1997. The Treasury repaid debt during the year. Amortization of foreign debt exceeded new borrowing by 6.5 billion kronur, or the equivalent of 5 percent of the Treasury’s foreign debt; this marked the first time since 1986 that amortization of foreign debt exceeded new borrowing. Domestically, new borrowing exceeded amortization by 3.4 billion kronur. While this turnaround in the Treasury’s finances is certainly to be welcomed, it is, nonetheless, a somewhat mixed blessing.