distribution and centralised them in the same location. saab has been acquired by general motors and volvo by ford. in periods, this has given rise to unrest among local authorities and employees, for example in the traditional manufacturing city of trollhattan. in norway, many large multinational companies have closed down operations at home and established their main offices and warehouses in the stockholm or malmo / copenhagen area. both the norwegian costs level and population density have been of disadvantage to use with regard to these structural developments. sweden has partly responded to strong international competition by continuing to develop new and improving existing products and processes. the country has also become a nordic financial centre by being the home country to four large financial conglomerates. as mentioned the norwegian economy has benefited from good prices for our export products and proximity to petroleum activities provide norwegian manufacturing with advantages. however, our oil dependence and a lack of diversification in our industry structure are a source of concern as regard long - term developments conclusion monetary policy ’ s most important contribution is to provide the economy with a nominal anchor. today, inflation targeting is the norm for small and medium - sized economies. exchange rates fluctuate, but there are several ways of hedging against fluctuations. after sweden switched to inflation targeting, the country has experienced solid output growth and low and stable inflation compared with the previous decades. since 2002, inflation has fallen sharply both in norway and sweden. between december 2002 and march 2004, the key rate was reduced by a total of 5. 25 percentage points in norway. during the same period, the key rate in sweden was lowered by 2. 25 percentage points, but from a lower level. two years after we started lowering interest rates in norway, there are signs that inflation is moving up, albeit slowly. the interest rate cuts have had a pronounced impact on demand, output and employment. we cannot expect the interest rate to have the same impact from one period to the next. the economy is also exposed to unexpected disturbances. as a result, we cannot fine - tune economic developments using the interest rate, but avoid the largest effects when the economy is exposed to disturbances. the experience of norway and sweden may indicate that inflation expectations remain stable even if inflation varies somewhat, as long as the interest rate is used actively to moderate the effects. with our highly open economies, we may have to accept somewhat wider swings than some countries.

and seeks to stabilise economic developments in the short and medium term will also contribute to promoting regional development. long - term economic developments consumer prices and economic growth in norway and sweden moved on a fairly similar path during the years around the dissolution of the union and up to the beginning of the 1970s. there are several reasons for this. first, we have been part of and been influenced by the same international business cycles. second, we have close trade relations, even if there were setbacks during the interwar period and the two world wars. third, both countries participated in various fixed exchange rate systems for long periods. after world war ii, we adhered to the international fixed exchange rate system bretton woods. during the period 1900 to 1970, the norwegian and swedish economy grew at an average annual rate of 3. 2 and 3. 3 per cent respectively. with norway ’ s emergence as an oil nation, a change occurred. the norwegian economy continued to grow at about the same pace. from 1970 to date, the norwegian economy has expanded by an report no. 39 ( 1983 ) : act on norges bank and the monetary system annual average of 3. 4 per cent. the development of the petroleum sector and the use of petroleum revenues contributed to relatively high growth also in the mainland economy. in sweden, however, growth fell to an annual average of 2 per cent. business sector competitiveness in norway after norway became an oil nation, competitiveness in the business sector in norway deteriorated in relation to sweden. first, wage growth in norway has been somewhat higher than in sweden. second, the value of the norwegian krone against the swedish krona has appreciated sharply. the rise in labour costs in local and common currency was particularly high in the mid - 1980s and after 1997. hourly labour costs for a swedish manufacturing worker were on average 8 per cent higher than for a norwegian manufacturing worker in 1980 measured in common currency. in 2004, however, hourly labour costs for a swedish manufacturing worker was almost 20 per cent lower2. competitiveness in norway ’ s manufacturing industry is now close to 20 per cent weaker than the average for the past 30 years. norwegians had to pay close to 138 norwegian kroner for 100 swedish kronar in 1970. today, we only have to pay a little more than 90 norwegian kroner. the appreciation of the norwegian krone has made it less expensive to buy goods and services in sweden. during longer periods, the exchange rate seems to have been