the effects of the financial crisis, central bank key rates were cut sharply in 2008 and are still close to zero in a number of countries. the key policy rate in norway was also reduced from autumn 2008. norges bank also implemented a number of extraordinary measures to improve credit flows. banks were provided with longer - term liquidity and direct access to us dollar liquidity, and collateral requirements for loans from norges bank were relaxed. on the advice of norges bank and a proposal from the ministry of finance, the storting decided that banks would be entitled to exchange covered bonds for government securities. the norwegian state finance fund and the norwegian state bond fund were established to bolster the supply of bank equity capital and loans to enterprises. in addition, the storting allocated funds to central and local government authorities for maintenance and investment in order to support activity. economic growth in norway came to a halt in autumn 2008, and output fell in both the fourth quarter and the first quarter of 2009. growth resumed from the second quarter. the substantial decrease in the key policy rate, combined with increased public spending and high oil investment has contributed to supporting activity. capacity utilisation is nonetheless still lower than normal, although the downturn appears to have been mild so far. without low key rates, inflation would have fallen too far. unemployment rose less than we projected last year. firms retained employees despite the fall in activity and many young people exited the labour force in favour of education. the mild downturn in norway is also reflected in the wage settlements, which have provided for appreciably higher pay increases than among our trading partners. in late spring last year, liquidity premiums in money and bond markets started to fall in norway. as these markets began to normalise, the extraordinary measures could be phased out. long - term loans were no longer provided after february 2009. after may, foreign exchange swap agreements were no longer provided. spring 2009 saw the first signs that the covered bond market was beginning to function. in june, it was announced that the swap arrangement would be phased out by gradually adjusting the minimum price to the bond rates prevailing in this market at that time. and finally, in october, norges bank tightened the collateral requirements for loans. our interest rate forecasts were revised up and indicated that the key policy rate would be raised when the impact of the financial crisis began to wane. since october 2009, the key policy rate has been increased by a total of 0. 75 percentage

david dodge : staying the course speech by mr david dodge, governor of the bank of canada, during a panel discussion at the banco de mexico, mexico city, 12 november 2002. * * * the dramatic events of the last two years and growing concern about the near - term prospects for the global economy have created a climate in which policy - makers focus only on current economic developments and lose sight of longer - term goals. there's a natural tendency to focus on the here and now, and to use any tools that are readily at hand to deal with today's problems, without proper regard for their long - term consequences. it's easy to forget the hard - learned lessons of the past and overlook the longer - term fundamentals that are necessary to support a strong recovery and sustained positive economic performance over time. what are those fundamentals? mr. greenspan, in his opening remarks to this conference, talked about the importance of the fundamentals, going all the way back to adam smith. what's interesting is that things have not changed that much. but we don't have to reach that far in history for guiding principles. we can look at the four key principles that emerged as part of the oecd consensus during the 1980s. the first principle relates to monetary policy. it basically recognized price stability as the appropriate goal for monetary policy over the medium term. policy - makers were advised to respond symmetrically, and in a forward - looking manner, to excess demand and supply so as to keep the economy on an even keel, thus achieving price stability and maximizing output over the medium term. the second principle applied to fiscal policy and the need for a more disciplined approach to managing the public purse. rising debt levels and an aging population made it clear that concrete action was necessary to eliminate deficits and put the debt - to - gdp ratio firmly on a declining path. automatic stabilizers should still be allowed to work during economic downturns. but in good times, surpluses would be generated that would help preserve the budget balance and keep the debt - to - gdp ratio on a downward trend. the third principle focused on the need for wide - ranging structural reform to reduce rigidities and inefficiencies. this meant removing burdensome regulations and legislative restrictions and eliminating wasteful government expenditures and distortionary tax and subsidy systems. the fourth, and final, principle called for trade liberalization. it was based on the premise that only through freer international trade can countries