the reports will form the basis for both monetary policy decisions and for our advice on the buffer. the primary objective of monetary policy is low and stable inflation over time. we operate a flexible inflation targeting regime, which also aims at stabilising economic activity. furthermore, norges bank gives weight to the risk that a prolonged period of low interest rates could lead to elevated risk - taking and excessive debt accumulation in the household and business sectors. there is always room for improvement. we will seek to improve systemic risk indicators and macro - stress testing approaches, keeping them at the research frontier. we will also work to better incorporate the financial sector in our macroeconomic models. economic research can contribute significantly to this, and in this context, some fundamental questions need to be addressed. – first, what is the macroeconomic impact of financial regulations? a greater understanding of how financial regulations act at the aggregate level is needed, both in containing systemic risk and in affecting the growth potential of economies. this would enable us to make more informed policy recommendations. – second, how should systemic risk for banks, non - bank financial institutions and markets be identified and measured? economists have proposed several methods of measuring systemic risk. but more research is needed in order to understand systemic risk arising from banks and non - bank financial institutions and their interaction. – third, how should monetary policy be conducted in the context of macroprudential policy? and there are many more questions, some of which will be discussed during this workshop. we are eager to learn from the expertise and the experience of other countries. norges bank is committed to investing in research and supporting cooperation with other central bankers and foreign academics. this workshop is one product of this commitment. we are fortunate to have such prominent speakers contributing to the program. i wish you fruitful and stimulating discussions, and i hope you enjoy your stay in oslo. fortunately, the weather is on our side, motivating us to stay focused on our work. it would have been more difficult on a sunny day in june. bis central bankers ’ speeches

a risk that outflows from the labour market to various social security schemes will remain high. sickness absence is high, and the share of the working - age population on rehabilitation schemes or receiving disability pensions is rising. many workers choose to take early retirement under the afp scheme ( contractual early retirement ) when they reach 62 years of age, and – because this age group is expanding sharply – this number will probably increase in the years ahead. in norway, close to 600 000 persons of working age receive social security benefits or pensions. this is equivalent to 25 per cent of the labour force. this is the norwegian economy ’ s achilles ’ heel. a particularly disturbing aspect is that disability is increasing among young people. 1 high income growth and a sharp rise in the number of households laid the basis for a sharp, long - term rise in house prices. self - reinforcing mechanisms were also at work, generating an atmosphere approaching euphoria. people hurried to buy dwellings in order to take advantage of the rise in value. it now appears that the housing market is cooling after an almost three - fold rise in prices in real terms in the course of the past 14 years. house price inflation has been accompanied by strong growth in household debt. household debt in norway is now about twice the level of disposable income, making the debt - income ratio higher than ever. at the same time, saving is declining and now seems to be negative. this means that in addition to fully financing their housing investments through mortgages, households are also raising loans to finance current consumption. as i mentioned earlier, the favourable developments in the norwegian economy of the past few years are primarily due to supply - side changes. a flexible inflation target for monetary policy – as in norway and a number of other countries – provides a sound basis for coping with the shocks to our economy that have occurred in recent years. the aim of preventing see elisabeth fevang og knut røed ( 2006 ) : ” veien til uføretrygd i norge ” ( the road to disability pensions in norway ), report no. 10 2006, ragnar frisch centre for economic research. norwegian only. inflation expectations from becoming entrenched below the operational target of 2. 5 per cent was one of the main reasons the interest rate was lowered to a very low level in 2003 and 2004, when inflation receded and approached zero. low interest rates have stimulated demand and output and gradually led to the prospect