In principle, these policy guidelines are just as appropriate for coping with favourable periods as with adverse periods. We will face another test of the macroeconomic framework when the terms-of-trade change is reversed and the gains either fully or partly dissipate. 4  BIS Review 50/2006  Structural policies aimed at maintaining flexibility in labour, capital and goods markets are, however, probably more important than stabilisation policy to sustain both high growth and economic stability in the future. Developments in labour productivity over the last two decades may be an indication of the importance of structural policies. Norway has managed to sustain productivity growth at a high level. Restructuring in the Norwegian economy in the 1990s, changes in the tax system, broader and deeper financial markets, and deregulation in trade and service markets appear to have resulted in a more efficient use of resources. Many of these changes were advocated by Victor Norman in the 1980s and early 1990s. For example, in 1991 he chaired an official committee 5 exploring possible efficiency gains in the government sector. In the report, high possible efficiency gains were envisaged as a consequence of the committee’s proposals, including a better functioning labour market. Victor’s conviction as to what economic policy can accomplish can be illustrated by the following quote from the committee’s report: "We believe that in principle it should be possible to once again reduce unemployment in Norway to one per cent without creating permanent pressures and restructuring problems in the economy." Thank you for your attention!

The real exchange rate appreciated, and manufacturing industry was scaled back. Frequent devaluations from 1976 were unable in the long term to prevent a decline in the manufacturing sector. On the contrary, they proved to be selfreinforcing. The absence of a nominal anchor was one of the main reasons behind the pronounced swings in the Norwegian economy in the 1970s and 1980s. With a policy of low interest rates and devaluations, inflation took root. Nominal interest rates were kept at a low level even though inflation rose. The wide fluctuations culminated in a credit boom in the mid-1980s. Victor Norman recognized this mechanism. In 1986, he argued in a newspaper article 4 that: “We are again treading a path where monetary and fiscal policies amplify cyclical fluctuations instead of moderating them. We saw this clearly in 1982/1983 and again last year.” The value of petroleum exports can be quite volatile and uncertain. Petroleum exports rose rapidly until the oil price declined markedly in 1986. The recession after the credit bubble burst and after oil prices fell was deep. The recession was more severe than would have been the case if we had maintained a larger, competitive manufacturing sector. Norwegian manufacturing lost export market shares in the late 1980s in spite of booming conditions abroad and substantial capacity slack at home. The value of petroleum exports rose again to historically high levels in 2000. High petroleum revenues to the government made it increasingly challenging to smooth cyclical fluctuations by means of fiscal policy.