3. 1 of husabø ( 2017 ) ). however, the literature is not fully unanimous about which price index the central bank should aim to stabilise. [ 6 ] table 3. 2 in husabø ( 2017 ) shows the degree of covariance with activity for alternative price indices. [ 7 ] one difference is that average domestic inflation has run somewhat higher than cpi inflation, which might suggest that a target for domestic inflation could be set somewhat higher than the target for cpi inflation. [ 8 ] see monetary policy report 3 / 22 [ 9 ] the model is a smaller version of our macroeconomic model nemo. [ 10 ] the increase in the real interest rate follows from the taylor principle, where the nominal interest rate should rise more over time than the rise in inflation. in most standard monetary policy models, the taylor principle must be satisfied to keep inflation stable. [ 11 ] tank is an acronym for “ two - agent new keynesian ”. see, eg, gali et al ( 2007 ). [ 12 ] this condition is entered as a residual term in our macroeconomic model nemo to correct for variables that are not covered in the model. [ 13 ] sims ( 2003 ). for an overview of the literature on rational inattention, see mackowiak et al ( 2021 ), “ rational inattention : a review ”, ecb working paper 2570. [ 14 ] the response in the chart is comparable to the response in earlier model exercises even if we here look at a somewhat different, simple model. for example, this is a model for a closed economy, while the mini - nemo model in the previous exercise is a model for a small open economy. [ 15 ] the model solves this by a markovian switching mechanism where inflation expectations switch between two regimes : one with anchored inflation expectations and the other with backward - looking expectations. the probability of switching between the two is endogenous and depends on the level of inflation. [ 16 ] coibion and gorodnichenko ( 2015 ) find that inflation expectations adapted faster to actual inflation during the great inflation of the 1970s than during the great moderation of the latter half of the 1980s to around 2007. [ 17 ] imf world economic outlook ( weo 2022 ) argues that monetary policy tightening and the fact that today ’ s cost shock is not caused by labour market conditions reduces the risk of wage - price spirals. published 20 october

sector negotiations can take into account that the higher pay increases are, the fewer people that can be paid over government budgets. the interaction here became clear when public sector employment fell after the expensive wage settlement in 2002. in the years following 1997, with strong growth in public expenditure, the fiscal rule pointed to a continued increase in the use of petroleum revenues. we had to expect that this increase would lead to a deterioration in the competitive position of norwegian manufacturing, either through higher wages or through an appreciation of the krone exchange rate, and with norway ’ s relatively higher wage growth, competitiveness has been weakened by approximately 15 per cent since the mid - 1990s. the krone exchange rate has been influenced by high oil and gas prices and prices for other norwegian export goods. monetary policy has also influenced the path for norway ’ s relative costs, but the nominal value of the krone is about the same as ten years ago. strong growth in public expenditure and expectations of moderately higher growth in the use of petroleum revenues now seem to have been factored into the cost level. even at the beginning of the oil age in norway in the early 1970s, the relationship between the use of petroleum revenues and changes in industry structure was raised as an issue. manufacturing industry was scaled back in waves in the course of this period. the last wave occurred around the turn of the millennium, but a substantial decline also occurred in the periods 1977 to 1984 and 1987 to 1992. prior to these periods, the manufacturing sector ’ s competitiveness deteriorated. today, about 55, 000 fewer persons are employed in manufacturing than was the case in 1998. the share of our imports that can be covered by current petroleum revenues and some of the petroleum fund will gradually diminish. competitiveness must therefore be improved. competitiveness may have to return to a level we have not experienced since petroleum production began. rough estimates indicate that the real exchange rate that safeguards the balance of trade when norway ’ s oil wealth no longer has the same weight in the economy will be more in line with the real exchange rate we had in the 1960s. thank you for your attention. 7 / 7