of the preparatory works is out of date so that the provisions of the act of 1985 must be interpreted in the light of the current economic system. moreover, section 1 reads “ [ t ] he bank may implement any measures customarily or ordinarily taken by a central bank ”, and this is something that changes, as we know. the act is thus flexible enough to provide a suitable framework also for the conduct of monetary policy today. it specifies, moreover, that norges banks sets the interest rates on its loans and deposits. norges bank ’ s responsibilities are also now well established through practice. the central bank is accountable norges bank has two parallel governing bodies. in addition to an executive board, appointed by the council of state, it has a supervisory council appointed by the storting. this is also shows the peculiar position of the bank in the government administration. the direct link to the country ’ s national assembly reflects that the storting under article 75 ( c ) of the norwegian constitution “ shall supervise the monetary affairs of the realm ”. the supervisory council continues to have a mix of administrative and supervisory duties, but its tasks were delimited by the act of 1985. 40 the supervisory council shall supervise the bank ’ s activities and ensure that the rules governing the bank ’ s operations are observed. the council has its own secretariat, adopts the annual accounts of norges bank and approves its budget. the bank continues in part to be the storting ’ s bank. a substantial change has taken place over the past decade in that the supervisory council shall no long submit a report on its activities to the ministry of finance, but directly to the storting. this is a partial reversal of the change to the act that was made in 1949. in my judgement, the tasks of the supervisory council could be broadened. among other things, it should be able to play a greater role in appointments to the executive board and bank management, for example, through a formal right to make recommendations. 41 this could give the supervisory council an even greater sense of ownership over the organisation and strengthen their sense of commitment. in central banking circles it is easy to confuse independence, expertise and long - termism with infallibility. 42 central bank independence in the use of instruments is contingent on central bank transparency and disclosure of the background for its decisions. this provides a basis for evaluating the bank ’ s decisions. moreover, the central bank is accountable. in norway, the

the act was drafted in the light of norges bank ’ s role in the postwar government administration. therefore, the new executive board, which replaced the board of directors under the 1892 act, is now appointed by the council of state. elster, jon ( 1979 ) : ulysses and the sirens. studies in rationality and irrationality, university press, cambridge. stanley fischer introduced the difference between goal and instrument independence. see fischer ( 1995 ) : “ modern approaches to central banking ”, nber working paper no. 5064. the norges bank act is discussed in helge syrstad ( 2003 ) : ” sentralbankens uavhengighet ” [ central bank independence ], fagbokforlaget. under the act, norges bank is an executive and advisory body for monetary, credit and foreign exchange policy and shall monitor developments in the money, credit and foreign exchange markets. the act makes no reference to the objective of monetary policy. on the contrary, its formulations are completely open - ended. 38 the bank shall conduct its operations in accordance with the economic policy guidelines drawn up by the government authorities. how this was to be interpreted was the subject of controversy in the first years. today, in the light of both the text of the act and of the preparatory works, the implications of this may also be unclear. this provision has not gained any further practical significance. today, norges bank no longer looks for guidelines in public documents. the reason is that the inflation target, which is governed by regulation in pursuance of other provisions of the act, provides the central bank with a suitable mandate. the central bank is no longer a limited liability company as it was until 1985, but a separate legal entity owned by the state. the central bank shall submit matters of special importance to the ministry of finance before making a decision. although this submission arrangement gives the ministry of finance an opportunity to state its views, and obliges norges bank to consider them, it does not relieve norges bank of the full responsibility for its decisions. the text of the act does not specify which matters are not only important, but of special importance. the preparatory works of the act provide little guidance today. when the act was under preparation, the interest rate was not a policy instrument, but had the nature of being an end in itself. it was rarely changed, and then only in critical situations for the norwegian economy. in the period of exchange rate management in the