Chart 8  Through the 1990s, inflation has been on a par with or below inflation in Europe. While the average annual rise in prices was a good 8% in Norway in the 1970s and 1980s, the annual rise in consumer prices has been confined to 2 1/4% in the 1990s. The subdued rate of increase in consumer prices has coincided with a strong expansion. In 1999, the number of employed was 200,000 higher than in 1990, i.e. an increase of 10%. We had to abandon our fixed exchange rate policy in December 1992, primarily as a result of the system’s inherent weaknesses in a world of free flows of capital and deep international financial markets. When the fixed exchange rate policy was formally abandoned, there was a risk that the Norwegian economy would again lose its nominal anchor. However, the krone exchange rate showed little change and quickly found a new trading range. BIS Review 14/2000  6  Chart 9  In the first years the krone exchange rate was very stable, also on a daily basis. When we now look back at developments in the Norwegian foreign exchange market in the 1990s, we see no significant change in 1992. On the contrary, we witnessed a pronounced shift in January 1997. It was from this point in time that daily quotations and month-to-month variations in the exchange rate show that the krone is floating. Wider fluctuations in the exchange rate have improved the functioning of the options market and forward contracts in Norwegian kroner.
To summarise, if the ABS markets work satisfactorily, they may contribute to the completeness of the financial system by distributing the risks and returns associated with a large range of non-marketable financial assets to a more diversified set of holders, with at least an equal or better capacity to bear these risks. This can contribute to enhancing the efficiency of the economic system. This is why I believe that a rebound of the securitisation market on a sounder footing, including a stable issuance activity of marketable assets remains crucial from a macro-financial point of view. III. What is the current state of the securitisation markets? Of course, the state of the securitisation markets is connected with the general situation of financial markets, and we all know that the current financial environment remains challenging. Financial markets had experienced some sort of improvement in 2009 and the early part of 2010. However, in early May adverse market dynamics took hold again across a broad range of financial markets, including several debt securities markets in the euro area, in an environment of diminishing market liquidity. As a result, most funding markets deteriorated rapidly. As you know, to help restore a normal market functioning again, the Governing Council of the ECB decided to take additional non-standard measures on 9 May 2010, including the conduct of purchases of euro area public and private debt securities in secondary markets, the reactivation of fixed-rate full-allotment long-term refinancing operations (LTROs), and the resumption of US dollar liquidity-providing operations.