Even then it was fairly inconceivable for most people to finance a home purchase without taking out a substantial mortgage. Today we have few scruples left, and we have never borrowed as much as we do now. The striking pattern in the chart applies to more countries than Norway. This pattern is described in detail in the well-known book about financial crises by the American professors Reinhart and Rogoff, This Time Is Different.1 Debt levels fluctuate substantially over time, but the cycle is very long. It may take several generations of debt accumulation before a sudden adjustment takes place – usually owing to some economic shock. According to Reinhart and Rogoff, crises generally occur when most people stop expecting them – often because one factor or another leads many to assume that economic mechanisms have changed. But they seldom have. The adjustment comes, and usually out of the blue. In Norway, such major corrections have only occurred twice over the past 120 years. The first time was after the Wall Street crash in October 1929. The deleveraging that followed is known as the Great Depression. The second time we experienced a correction, but on a substantially smaller scale, was during the banking crisis around 1990. The backdrop was the fall in the oil price in 1986 and the sharp jump in interest rates in Europe following German reunification. Those of us born before 1970 clearly remember the banking crisis and drop in house prices in the early 1990s.

Distinguishing features such as shallow and narrow financial markets, limited number of financial instruments, particular behavioural traits of economic agents and distinctive economic and financial memories, can reveal non-traditional behaviour and interesting phenomena that do not appear and, are, therefore, not addressed in research findings from developed markets. The identification of these particular characteristics and their implications for research findings might be good enough to spark the interest of economic journals and economic conferences to bring these characteristics to the attention of the research community and enrich mainstream economic theory. Just to illustrate a few interesting cases, I would like to remind you that the development of economic and financial markets in response to Bank of Albania policies has been weak and sometimes puzzling, making it difficult to interpret using mainstream economic models. The desire for unhedged borrowers to borrow in foreign currency, the reduced efficiency of transmission mechanisms in the presence of central bank credibility, the potential role of informal and parallel markets and informal economic activity, are some examples of interesting traits of economic behaviour. Several authors have been intrigued by such developments. Hence, they have conducted extensive research on these phenomenon in similar emerging and developing economies, which have later seen the light of publication. Good examples are found in the research work done by the national bank of Austria (OeNB) on the level of euroization in the region, with interesting results that have helped authorities but have also increased the interest of other institutions and academics in euroization issues.