Unemployment and annual CPI inflation 1976–2012 and the long-run Phillips curve 1997–2011 16  16 Unemployment and annual CPI-inflation 1976-1997 Unemployment and annual CPI-inflation 1998-2012 Long-run Phillips curve 1997-2011  CPI-inflation, annual percentage change  14 12  14 12  1976  10  10  8  8  1991Q4  6  6 1993Q4  4  4  2011Q3  2  2  1998Q1  0  0  -2  -2 1  2  3  4  5  6  7  Unemployment, per cent  8  9  10  11  12  Note. Annual inflation from 1998 Q1 and onwards (in red) is a moving average of four quarters’ quarterly inflation, that is of quarterly inflation 1997 Q1 and onwards. The long-run Phillips curve is in Svensson (2012d) estimated with quarterly inflation in the period 1997–2011. The dashed horizontal line corresponds to an average CPI inflation of 1.4 per cent. Sources: Statistics Sweden and own calculations. 14  BIS central bankers’ speeches
In Norway, this resulted in a period of low nominal interest rates set by the government authorities, direct regulation of credit through quotas set out in a separate credit budget, channelling of loans for special purposes via state banks, regulation of cross-border capital movements, a fixed but adjustable krone and occasionally the use of price and wage regulation. For a period, regulation and fine-tuning seemed to be having the intended effect. But in the 1970s, inflation got out of control in Norway and in a number of other countries. The Norwegian economy experienced a price/wage spiral. Although the krone was devalued several times in the 10-year period from 1976 to 1986 in pace with high price and wage inflation, this was nonetheless not sufficient to prevent a decline in the manufacturing sector. In 1980, Odd Aukrust, Head of Research in Statistics Norway, stated the following with regard to developments in the Norwegian economy: "Unfortunately there is even less reason for optimism this time. It seems that competitiveness in Norwegian manufacturing will deteriorate in the year ahead. The main problem is that no one can control price  4  See Ecklund (2008), p.120. BIS Review 111/2008  3  developments. With annual inflation at approximately 10 per cent, no one dares to invest in measures that could stop this price carousel.” 5 High inflation showed that the economic policy framework was not functioning as intended, and the importance of providing the economy with a nominal anchor became evident.