Monetary policy steers inflation in the medium and long term and can in addition contribute to smoothing fluctuations in output and employment. The central government budget – growth in government expenditure – influences the real krone exchange rate and the size of the internationally exposed sector in the long term. The fiscal rule – the fiscal policy guidelines – enhances the predictability of petroleum revenue spending in the Norwegian economy even when the budget from one year to the next is used to stabilise economic developments and even when the automatic stabilisers are allowed to operate. A fairly steady phasing-in of petroleum revenues over time curbs the impact on the krone and reduces the risk of abrupt and sizeable structural shifts between the international exposed and sheltered sectors. In this way, the framework contributes to more stable expectations concerning, among other things, developments in the krone exchange rate and competitiveness. BIS Review 60/2009  1  The krone floats and fluctuates somewhat, and has shown a tendency to appreciate in favourable times and fall in value in response to negative shocks. Nonetheless, budgetary policy and the petroleum fund mechanism contribute to stability in the krone. This can be seen clearly when comparing movements in the krone in recent years with currencies of other open economies with substantial exports of raw materials, such as Australia and New Zealand. The economic turnaround in Norway occurred just over a year ago. House prices had started to fall, growth in consumption subsequently came to a halt and housing starts declined.
Gordon, Paul, Piotr Skolimowski and Craig Stirling (2019), “Lagarde’s ECB Toolkit Threatened as Subzero Skepticism Grows”, Bloomberg, 31 October. Jansson, Per (2016), “Time to scrap the inflation target?”, speech at Swedbank, Stockholm, 7 December. Jansson, Per (2017), “The ideological debate on monetary policy – lessons from developments in Sweden”, speech at Fores, Stockholm, 6 December. Jansson, Per (2018), “Monetary policy in less favourable times – what are the options?”, speech at Insurance Sweden, Stockholm, 4 December. Milne, Richard (2019), “Riksbank set to exit negative rates with December rise”, article in Financial Times, 24 October. 14 [17]  Orphanides, Athanasios and John C. Williams (2003), “Imperfect Knowledge, Inflation Expectations, and Monetary Policy”, NBER Working Paper No. w9884. Weiss, Ittay (2017), “Nothing matters: how the invention of zero helped create modern mathematics”, The Conversation, 20 September, https://theconversation.com/nothing-matters-how-the-invention-of-zero-helped-create-modernmathematics-84232  15 [17]  Figure 1. Inflation, 1350-2018 CPI, annual percentage change 300  300 CPI  200  200  100  100  0  0  -100 1350  1450  1550  1650  1750  1850  1950  -100  Source: The Riksbank  Figure 2. Share of employed persons in industry and mining and private service sector respectively Per cent  35  35 Private services Industry and mining  30  30  25  25  20  20  15  15  10  10  5  80  85  90  95  00  05  10  15  5  Note.