The dollar functioned as an anchor currency in the Bretton Woods system of international exchange rate management. The period was marked by high economic growth and low inflation. By participating in an international system we achieved credibility as to the authorities’ commitment to the fixed exchange rate. During the devaluation period in the 10 years between 1976 and 1986, the credibility of the fixed exchange rate regime was severely impaired. In this period, a total of ten devaluations or "technical adjustments" that entailed a devaluation were made. The devaluations took place under the so-called European currency snake and under the currency basket system that was established in December 1978. The many exchange rate adjustments during the devaluation period were among other things aimed at correcting the previous deterioration in Norway’s relative cost position. As the chart shows, while the Norwegian krone gradually lost value in nominal terms against the Deutsche mark, in real terms the value was broadly constant. Such repeated "reoptimisations" eventually led to expectations that the authorities would not honour their promise of a fixed exchange rate in the future. Instead,  4  Kydland, F. and E. Prescott (1977), “Rules rather than discretion: The inconsistency of optimal plans”, Journal of Political Economy, 85, 473-490. BIS Review 10/2007  9  there were growing expectations that if price and cost inflation became too high, the authorities would devalue the krone. The social partners and businesses then factored in higher inflation in their wage demands and price-setting.

Niklaus Blattner: Financial market infrastructures facing technological, economic and regulatory challenges Summary of a speech by Mr Niklaus Blattner, Deputy Chairman of the Governing Board of the Swiss National Bank, at the XI AWK Group Financial Services Lunch, Zurich, 20 September 2006. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Smoothly and efficiently functioning financial market infrastructures form the backbone of the International Financial Centre of Switzerland. The future of these infrastructures will largely hinge on trends in Europe, which point to stronger consolidation. However, healthy competition is the prerequisite for investment and innovation incentives in a consolidated stock market and settlement environment. This would also contribute to reducing the existing inefficiencies, in particular with regard to the processing of cross-border transactions. Yet a competitive environment will develop only if market participants can choose freely among the different providers and if the infrastructures are interoperable, i.e. if the providers grant each other and their participants mutual non-discriminatory access. At present, competitive obstacles exist at the technological, economic and regulatory levels. For instance, costs for changing providers are high. Moreover, financial market infrastructures are often operated in “silo” mode – either explicitly or implicitly – with clearing and settlement being handled by only one provider. But silos impede competition. A suitable regulatory framework must therefore be created to strengthen competition.