Income and wage determination is fairly centralised, and the social partners evaluate the effects of wage outcomes on employment. In a number of countries that have switched to a monetary policy regime based on inflation targeting, fiscal policy is oriented towards reducing government debt and deficits. In Norway, fiscal policy has traditionally played an important role in demand management. This task is facilitated by the fact that the Norwegian government has greater financial leeway than most other countries, due to its oil revenues. Norwegian government authorities receive substantial revenues from the extraction of oil in the North Sea.
Oil revenues increase consumption possibilities.
However, it is a challenge to manage these resources in a way that increases welfare for both current and future generations. A rapid expansion of the sheltered sector based on uncertain and perhaps temporary increases in petroleum revenues may lead to the situation called Dutch disease. To manage its resources, Norway has created the Government Petroleum Fund, which receives revenues from the petroleum sector, transfers the amount necessary to produce a balanced government budget and invests the surplus abroad. As long as the increase in petroleum income is kept outside the domestic economy, there will be less need for structural change and thus less need for exchange rates to change. A one dollar increase in the oil price gives an increase in GDP of almost one percent, and most of it arrives as increased budget revenues.