would imply a constraint on the government ’ s scope for manoeuvre. the study that is being planned may analyse fundamental and practical aspects of establishing a link between the pension system in norway and the assets in the government petroleum fund. the national insurance fund ’ s investments are mainly confined to norway. as a result, changes in the value of the fund ’ s equity portfolio primarily reflect developments in norwegian business and industry. the fund has larger ownership interests in individual companies than the petroleum fund, and wider fluctuations in value. state ownership nok bn financial investor strategic owner 15 0 high 10 0 ris k low 0 - 1 1 - 5 5 - 10 10 - 15 1 5 - 4 0 4 0 - 4 9 5 0 - 7 4 7 5 - 9 9 ownership interests per enterprise petroleum fund's equities national insurance fund's equities direct ownership as indicated in the chart, the government has substantial holdings in individual companies. the government ’ s five largest stakes in norwegian companies can be roughly estimated at nok 300 billion. in general, concentrated ownership requires a more strategic ownership approach and gives rise to higher risk than diversified ownership. risk associated with state ownership nok bn the five largest state enterprises petroleum fund's bonds petroleum fund's equities national insurance fund's private bonds national insurance fund's equities return risk this is illustrated further in the chart. the composition of government assets is broken down into equities and bonds in the petroleum fund and the national insurance fund and government ownership interests in the five largest companies. the horizontal axis provides a normal measure of risk, in other words the standard deviation of the return. the risk is estimated on the basis of the historical performance of the companies ’ share prices. for unlisted companies, we have used share price performance for comparable international companies. higher risk means that the assets are more exposed to fluctuations in return. as a whole, the return on the petroleum fund and the return on private bond holdings in the national insurance fund feature a moderate risk profile. the risk is higher for both the national insurance fund ’ s equities and the state ’ s ownership interests in the five largest companies. for a given expected return, the owner should aim at reducing risk because future income will then be more secure. conversely, the owner should require a higher return on investments with higher risk. the absence of this excess return will reflect social losses. it is important to bear in mind that the government can choose

central banks more credible and independent are more likely to be adopted and sustained. 7 let me make it clear that i think that currency competition has been a much larger force in emergingmarket economies, in which the costs of poor policies have been demonstrated quite clearly, than in advanced economies. still, at least some degree of currency competition may be at work in the united states as well : one could argue that competition faced by the dollar, particularly abroad, is likely greater now than before the introduction of the euro because of the scale of euro - denominated financial markets and the financial institutions in the euro area, but i would not want to push that argument too far. the forces behind currency competition that have bolstered incentives for central banks to maintain low inflation and so have helped anchor inflation expectations are likely to persist and perhaps strengthen. the ease with which funds move across capital markets should continue to ensure that the responses to inflationary central bank policies will be swift and significant. the resulting incentives provided by currency competition should continue to foster relatively low far - forward nominal interest rates in many countries. as long as capital markets remain open and people remain aware of the costs of high inflation policies, i believe that the forces behind the low level of long - term interest rates and hence the general flatness of yield curves around the globe will tend to persist for some time. in a paper with douglas irwin, i documented a similar dynamic at work in the gradual reversal of protectionist policies in the united states in the 1930s and 1940s. see douglas a. irwin and randall s. kroszner ( 1999 ), " interests, institutions, and ideology in securing policy change : the republican conversion to trade liberalization after smoot - hawley, " journal of law and economics, vol. 42 ( october ), pp. 643 – 73.