keeps turning, structural reforms in principle never end. the most appropriate speed and sequence of reforms e. g. depend on whether the output gap is positive or negative. this makes it difficult to draw a clear distinction between structural and fiscal policy. in international terms, including countries that apply best practice inflation targeting, denmark has seen very moderate volatility in inflation as well as output in recent years. we attribute this, in large measure, to the use of stabilisation policy as described above. in the 1970s and early 1980s, a very activist fiscal policy was pursued, as opposed to the current situation. our government debt rose steeply and the exchange - rate policy was anything but consistent. in those years, danish volatility was high by international standards. danish experience thus speaks against fiscal as well as monetary fine - tuning of the economy. efforts to stabilise the economy often end up rocking the boat. our experience, in the main, corroborates the focus on structural economic factors theoretically established by kydland and prescott. i want to make one final point : it is appropriate that drivers practise and qualify for a driver ’ s licence before getting behind the wheel. similarly, it is appropriate that a country documents that it is ready for emu prior to entry. part of this documentation is erm ii membership

an option, for brief periods of time, to counter adverse exchange - rate movements. intervention cannot stand alone, however. organisationally, this also implies that we must be able to adjust our interest rates when required, without being tied down by the meeting schedule of a monetary - policy committee. this is a well - known fact in the market and thus highly transparent. alternatively, one could say that our monetary - policy committee convenes every day and as required. central bank independence is a prerequisite in this respect. without it, the implementation of necessary measures can be endangered. we have a clear division of work regarding intra - marginal interventions. the board of governors, in collaboration with market operations, establishes a strategy based on current market conditions. the board of governors has access to real - time information on any interventions, but is not consulted in advance. interventions within one day are never capped, but subject to ongoing assessment in order to establish whether strategy adjustments are called for. the ecb is kept informed on an ongoing basis. in principle, one might ask whether the design of our stabilisation policy is appropriate? theoretically, there are two arguments for acting as we do. firstly, the institutions are designed to be in compliance with emu participation and thus also with the provisions of the treaty. at some future point in time we expect denmark to enter emu, and when it does, we will not have to alter our fiscal policy, since it is already based on government finances in surplus or close to balance. there is strong political support for this rule - bound division of labour in economic policy. the awarding of this year ’ s nobel prize in economic science demonstrates that the design of institutions is also considered to be of great theoretical importance. secondly, we know from the “ impossible trinity ” that in a world of free capital movements, it is not possible to set interest and exchange rates independently of one other. the central bank has one instrument, and one instrument only, at its disposal : the short - term rate. any attempts to stabilise the exchange rate while at the same time meeting other targets, are thus futile in theory. in practice, they spawn a number of problems which are aggravated the closer one seeks to stabilise the exchange rate. a number of central banks, including several from new eu member states, currently base their monetary policy on inflation targeting. in principle, the central bank seeks to approximately meet not only one, but two targets, an inflation target and an