2005 ) : folkerett ( international law ). eduardo borensztein and ugo panizza ( 2009 ) : “ the costs of sovereign default ”, imf staff papers, vol. 56, no. 4. debt. in economic policy this is known as a time - inconsistency problem. it can be profitable to make lofty promises, but turn your back on them once you have cashed in the benefits. why do countries not renege on commitments in stable times? we observe that they do honour their commitments, but the economic literature does not provide us with a good explanation for why this is the case. countries want to preserve a good reputation. governments that default do so in adverse times, but only after sharp fiscal retrenchment to avoid that fate. 3. countries default more frequently than we believe it is no new phenomenon that some countries live beyond their means and fail to settle the bill. history shows that many countries have defaulted on sovereign debts. this has occurred during emerging phases. from 1500 to 1900, spain defaulted on its sovereign debt 14 times. 5 france defaulted nine times in the same period, while the states that later became germany defaulted six times. england also defaulted once, but as far back as in 1594. ( see chart : sovereign debt default. ) the norwegian government has not always managed to settle its debts, but by little fault of its own as norway was left with considerable government debt after the secession from denmark in 1814. the government had no treasury or liquid assets. attempts to increase tax revenues failed. moreover, norway had little creditworthiness. at the beginning of 1816 the government was not in a position to service its debt. after more than four years, the debt was negotiated down from 6 to 3 million speciedaler. the entire principal was to be repaid over a ten - year period. in january 1820, norway concluded a loan contract with the finance company benecke brothers in berlin. 6 it was positive for a young nation to be able to borrow, but the terms of the loan were generally perceived as being poor, and the loan was popularly referred to as “ tyvelanet ” ( highway robbery ). all government property and current customs revenues were required as collateral. after a period, the “ tyvelan ” was replaced by a loan on more favourable terms. after the great depression in the 1930s, many european states struggled with debt problems. government debt was written down in austria,

monetary policy stimulus because our goc bond holdings are growing. in october, we recalibrated the program to focus more directly on longer - term borrowing rates. this reduced the amount of term risk that market participants need to absorb, putting downward pressure on term premiums. this shift in composition allowed us to reduce our weekly purchases to a minimum of $ 4 billion, without reducing the overall stimulus coming from qe. at the time of our january monetary policy report, we indicated that if the economy plays out in line with or stronger than our economic projection, we won ’ t need as much qe stimulus over time. and in our march policy decision statement, we said that as we continue to gain confidence in the strength of the recovery, we will gradually adjust the pace of our qe purchases. we also indicated that first - quarter growth appears to be better than we expected in january. we will have a new full economic projection at our april policy decision. i want to be clear here : moderating the pace of purchases while adding to our holdings would simply mean that we are still adding stimulus through qe but at a slower pace. it would not mean we are removing stimulus. we would be easing our foot off the accelerator, not hitting the brakes. when we start gradually dialling back the amount of incremental qe stimulus that we are adding, we will eventually get down to a pace of qe purchases that maintains — but no longer increases — the amount of stimulus being provided. that is, a pace where our goc bond holdings are largely stable and we reinvest the proceeds of maturing assets. at that point, the accumulated amount of goc bond holdings would still represent a significant amount of stimulus in the system. i ’ d like to stress a few things about our journey to this reinvestment phase of qe. first, the process for getting there will be gradual and in measured steps. second, the timing of these moderations to the pace of purchases, and the amount of time that we take to get to the reinvestment phase, will be guided by our evolving assessment of the macroeconomic outlook and the strength and durability of the recovery. and third, adjusting the pace of qe purchases won ’ t necessarily mean that we have changed our views about when we will need to start raising the policy interest rate. these decisions are distinct. we have committed to continuing our qe program — by which we mean positive net purchases — until