been considerably off the mark. looking back, it is also easy to understand why. in 1905, prices had remained approximately unchanged for several decades. the krone ’ s precursor, the speciedaler, and then the krone itself had been pegged to silver and gold standards since 1842. these systems provided a fixed nominal anchor for the economy and for prices. this was also the case for several of our trading partners. from 1875, norway was also a member of the scandinavian currency union. a more detailed description will be provided by professor lars jonung. economists of the time could not, based on historical evidence, predict that national and international monetary systems would be facing substantial disturbances that would push up the price level considerably and lead to extensive instability. with the first world war, the gold standard was suspended and the money supply and price level rose sharply. the deflationary policy of the 1920s brought the price level down, but probably also contributed to instability. the price level rose again during the second world war, when the occupying powers used the printing press to finance a substantial portion of their expenditure. the economic policy of the 1970s and 1980s contributed to high inflation. so, how well would economists in 1905 have predicted the norwegian level of real income in 2005? they would have been off the mark here too. they were not in a position to predict that the growth rate in the norwegian and global economies would rise as a result of considerable technological progress, restructuring and higher productivity. on the other hand, they could to some extent have predicted our current industry structure based on their economic history. from 1865 to 1900, primary industries ’ share of total gdp fell from about 34 per cent to 22 per cent. in the same period, manufacturing, other goods production and service industries accounted for an increasing share of total gdp. in 1900, about 24 per cent of gdp was generated by manufacturing and other goods production. if the economists of the time had projected developments in these three industries, they would have estimated that primary industries ’ share of total gdp would fall to below 5 per cent. manufacturing and other goods production would increase its share to 30 per cent and service industries to 66 per cent. value - added in primary industries fell somewhat more than economists in 1905 would have projected and service industries increased somewhat less. they would have been less accurate in their projections for developments in manufacturing. although manufacturing ’ s share of total gdp increased up to the beginning of the 1950s, growth in private and public services gradually bypassed manufacturing,

mortgages through covered bonds has been reflected in household lending rates. in combination with very low risk weights and corresponding low capital requirements on residential mortgages, banks may have favoured such lending. as a result, corporations seeking financing may be pushed into bond markets through a crowding out effect. in addition, a vibrant market could make bond financing more attractive and pull corporate borrowers to the market. higher interest rates on banks ’ corporate loans may contribute to this effect. in some of the markets in europe that have seen substantial deleveraging, loans to smes have been provided at steep interest rates. however, the economic situation and investment demand in general are probably much more important in determining overall growth in investment financing by banks. in general, banks still provide loans to profitable enterprises. to sum up : the covered bond market provides investors with a broad set of investment opportunities, banks with cheap funding and house buyers with ample credit. at the same time, extensive regulatory measures safeguard the solvency and liquidity of the banking system as a whole. a well - capitalized banking system with stable and liquid funding options is a prerequisite for markets to develop and thrive. that includes the covered bond market. thank you for your attention. 2 / 3 bis central bankers'speeches 3 / 3 bis central bankers'speeches