age for norwegian cultural development, with the literature of henrik ibsen, the music of edvard grieg and later the paintings of edvard munch. in the period preceding the first world war, the world experienced a period of strong growth in trade and cross - border capital flows. there were few political barriers and major technological advances fostered growth in trade. prosperity increased. but this period was interrupted, and in the interwar period protectionism gained ground, with trade barriers and a contraction in international trade. this was combined with deep economic recessions. economic policy after the second world war after the second world war, a strong belief evolved in norway that the economy could be controlled and steered in the desired direction. the support for a market economy lost ground after the recessions and financial instability in the interwar period. economic policy was marked by coordination, control and regulation. at the same time, norway took part in international organisations. international organisations made an effort to promote economic cooperation and increased integration of international trade and fixed investment. trade barriers were gradually scaled back and trade picked up already in the 1950s. capital movements remained strongly regulated, however. maintenance of a high level of fixed capital formation in inter alia infrastructure and private and public industrial companies was an important part of economic policy after the war. the fixed investment - togdp ratio stayed at a historically high level until the late 1970s. on the other hand, low or negative real interest rates, combined with credit regulation, contributed to a low return to capital and an inefficient use of resources. since the late 1970s, the investment ratio has declined in norway as in many other european countries. india, on the other hand, is in the process of catching up. high investment growth in infrastructure as well as in businesses is probably important to maintain high economic growth in india. the government sector in norway increased in importance until the beginning of the 1990s. taxes were raised to support increased use of resources in the public service sector and to support a rising level of transfers between households and industries. the regulatory economic policy in the post - war period was, however, not sustainable. this policy was at the root of many of the problems that followed in the 1970s and 1980s. today ’ s formulation of economic policy reflects the experience gained and the lessons learned in these two decades. the economic policy contributed to wide fluctuations in the norwegian economy. inflation became high and variable. this was largely due to a perception in the 1960s and 1970s that strong growth

jarle bergo : the norwegian economy - possibilities and challenges address by mr jarle bergo, deputy governor of norges bank ( central bank of norway ), at a seminar hosted by agder research foundation, arendal, 12 may 2005. please note that the text below may differ slightly from the actual presentation. the address is based on the assessments presented at norges bank ’ s press conference following the executive board ’ s monetary policy meeting on 20 april, inflation report 1 / 05 and on previous speeches. the charts in pdf - format can also be found on the website of the norges bank. * * * the norwegian economy is growing at a solid pace and there are prospects that growth will remain high. the recession was mild after the previous expansion culminated in 2002. the period of relatively high cost inflation in norway came to an end without production being impacted to the same extent as during the recessions in the early 1980s and around 1990. one of the main reasons for this is probably that low inflation in the 1990s and current monetary policy have anchored expectations of low and stable inflation among economic agents. together with private consumption and fixed investment in the petroleum sector, traditional exports were an important factor underlying growth in the early stages of the recovery that started in the first half of 2003. prices for many of our main export goods have risen as a result of strong growth in new markets. however, growth in norway ’ s total exports excluding oil and gas is lower than import growth among our trading partners. mainland fixed investment has gradually become an important driving force in the upturn. investment has picked up in most industries and growth was stronger than expected towards the end of 2004. norges bank ’ s regional network has registered rising investment in all industries. petroleum investment in particular appears to be growing at a rapid pace. this may continue to boost mainland output. even with a strong upturn in the mainland economy, the increase in the number employed has been relatively modest. productivity rose fairly sharply in the first few quarters after economic growth picked up. normally, when productivity growth is strong, enterprises again begin to hire new staff. the current upturn has lasted about two years. the fairly low level of growth in employment, as measured by the number of employed, must be seen in the light of the sharp decline in sickness absence through 2004 after rising for several years. the decrease in sickness absence has increased the supply of labour to companies and reduced the need for new employees. measured in person - hours worked, employment