2007 OECD Economic Surveys: Norway 2007

image of OECD Economic Surveys: Norway 2007

OECD's periodic survey of Norway's economy. This edition examines the economic challenges facing Norway in the coming years, including preserving Norway's economic success, managing monetary policy under low inflation, putting public finances on a sustainable path, boosting the labour supply, and encouraging innovation.

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Monetary policy under low inflation

Norway has a robust macroeconomic policy framework to manage the potentially destabilising impact of its oil wealth. Nonetheless, emerging macroeconomic imbalances due to the unusually large terms of trade shock may require flexibility in adaption of policy rules. The current strong growth in the real economy and the positive output gap must be seen against the back-drop of sustained low core inflation, reflecting monetary policy trade-offs inherent in the flexible inflation targeting regime. Still, monetary policy is faced with a difficult trade-off, as bringing inflation quickly up towards the inflation target may conflict with stable developments in production and employment.

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