According to the International Monetary Fund's (IMF's) 2005 Financial Sector Assessment Program (FSAP), Norway's conduct of monetary policy is transparent. The central bank of Norway, Norges Bank (NB) publishes a variety of documents relevant to the monetary policy process, from compilation of data to policy formulation and implementation. These include the Annual Report, the Monetary Policy Report, and the Financial Stability Report (all annual), as well as Working Papers generated from the research done by the NB statistics department, Economic Bulletins, and a variety of statistical documents. These materials are readily accessible to the public on the NB website. In addition, the NB website provides webcasts of the press conferences held following each of the central bank's executive board meetings.

General Overview

In a 2005 Financial Sector Assessment Program (FSAP) publication by the International Monetary Fund (IMF), the assessment team noted that Norway's monetary policy is "conducted in a transparent fashion" (p. 22) and this transparency is supported by a number of institutional reforms that had recently taken place. At the time of the FSAP, however, IMF officials suggested that the Norges Bank (NB), Norway's central bank, could provide a clearer explanation of its inflation-targeting regime and the way in which exchange rates were implicated therein. Monetary policy is the responsibility of NB. The provisions of the Norges Bank Act of 1985 establish the bank as a legal entity owned by the Norwegian state. According to the IMF's 2003 Data Module Report on the Observance of Standards and Codes (ROSC), the Act was revised in the summer of 2003 in such a way as to contribute to reducing the complexity of the legal framework underpinning monetary policy, going forward. The Act was last amended in 2005.

Norges Bank has adopted the Norwegian Economy Model (NEMO), a macroeconomic model which is described in the NB's June 2007 Monetary Policy Report as a tool for both projection and analysis. A key concern in the design of NEMO is transparency. The Norges Bank publishes both a Monetary Policy Report and a Financial Stability Report, which together comprise its primary disclosure instruments pertaining to monetary policy. However, the NB website also makes available a range of other documents to the public, including speeches by NB officials, press releases and press coverage of NB activities, statistics on foreign exchange and money market activity, historical statistics, and economic bulletins. The 2006 Norges Bank Annual Report (published in 2007) notes that the Norges Bank Act requires the central bank to inform the public about the monetary, credit, and foreign exchange situation, and about the assessments on which monetary policy decisions are based" (p. 38) as well as the assessments that underlie monetary policy implementation. The report specifically acknowledges the importance of "transparency and predictability" (p. 80), and recognizes that such transparency is key to improving policy predictability and effectiveness, which, in turn, leads to enhanced stability. To this end, the NB now regularly offers webcast press conferences after each monetary policy meeting of the board of directors and produces a variety of reports and publications on its website, as well as the text of addresses by the bank's governor and deputy governor. The report adds that the NB website is constantly under development, in order to improve online accessibility to information about its activities and policies. Quarterly economic bulletins and periodic Working Papers about ongoing research are also available online.

Norway has been a subscriber to the IMF's Special Data Dissemination Standard (SDDS) since June 1996, and the SDDS website discloses that it meets all requirements for timeliness, coverage, and periodicity, but avails itself of the flexibility option for timeliness with regard to general and central government operations and the periodicity flexibility option for central government operations. Norway provides advance release calendars for all relevant datasets, and summary methodologies for all datasets.

According to a 2007 press release on the 2008 fiscal budget, provided on the MoF's website, since March 2001, Norway has followed a monetary policy based on a flexible inflation targeting regime. Short- and medium-term policies seek a balance between low, stable inflation and improved productivity and employment opportunity. Long-term policy is to provide a nominal anchor to the Norwegian economy. The press release briefly addressed monetary policy issues, noting that the NB's operational target was to maintain consumer price increases at a rate of about 2.5 percent. To achieve this, NB was to implement forward-looking decisions regarding interest rates, increasing them only gradually in order to permit reassessments as required and so that economic developments could be taken into account.

According to the IMF's 2007 Article IV Consultation report, Norway has considerably enhanced the credibility of its inflation-targeting framework. According to surveys, inflation over the medium term is expected to remain at 2.5%, and it is understood by the government's social partners that monetary tightening would be triggered should there be excessive increases in wages. Some private sector opinion holds that there should be greater emphasis on exchange-rate stability, but the IMF holds that this could conflict with inflation targeting goals under certain circumstance. The IMF adds that the NB's policy has always been clearly focused on the rate of inflation, and that exchange rate interventions are considered only in the context of inflation, even at the risk of short-term appreciation of the national currency. The IMF suggested that the Norges Bank continue to reach out to educate the public on inflation targeting and its role in monetary policy.

The Principles

Clarity of roles, responsibilities and objectives of central banks.

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In a 2005 FSAP publication by the IMF it's stated that Norway's monetary policy is "conducted in a transparent fashion" (p. 22) and this transparency is supported by a number of institutional reforms that had recently taken place. The responsibility for monetary policy is allocated to the NB by the Norges Bank Act of 1985. Section 2 of the Act specifies the terms of the relationship between the central bank and the government, Section 4 relates to decision-making procedures regarding the exchange rate, and Sections 19 and 20 set forth the conditions upon which bank deposit and loan interest rates are set. Responsibilities regarding the dissemination of information on monetary policy are covered in Chapter 1 of the Act, but the 2003 IMF ROSC notes that, until recently, there was no specific provision within the Act explicitly dealing with data compilation. Authorization for data collection is covered under the Financial Supervision Act of 1956. The ROSC did mention that a revision of the Act that occurred in 2003 would give NB a more explicit legislative mandate for data collection, thus contributing to the simplification of the legal framework going forward.

According to the Norges Bank's 2006 Annual Report, published in 2007, the focus of Norway's monetary policy is on maintaining a low, stable rate of inflation. To achieve this, a target consumer price inflation target of about 2.5% annually is targeted. The Annual Report states that it generally does not take into account the effect of changing interest rates, taxes, excise duties, or unusual temporary disturbances on consumer prices. By setting low, stable consumer price inflation as its operational objective, the NB hopes to provide "an anchor for economic agents' expectations concerning future inflation" (p. 36). By creating confidence in its the inflation target, the NB believes that it can help to stabilize productivity and employment through its monetary policy.

Open process for formulating and reporting monetary policy decisions.

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According to the IMF's 2005 FSAP publication, Norway's monetary policy is "conducted in a transparent fashion" (p. 22) and this transparency was supported by a number of institutional reforms that had recently taken place. However, the assessment does not directly address Norway's compliance with this principle. According to the 2006 NB Annual Report, the Norges Bank Act requires that the NB "inform the public about the monetary, credit, and foreign exchange situation, and about the assessments on which monetary policy decisions are based" (p. 38) as well as the assessments that underlie monetary policy implementation. The report specifically acknowledges the importance of "transparency and predictability" (p. 80), and recognizes that such transparency is key to improving policy predictability and effectiveness, which, in turn, leads to enhanced stability. To this end, the NB now regularly offers webcast press conferences after each monetary policy meeting of the board of directors, and produces a variety of reports and publications on its website, as well as the text of addresses by the bank's governor and deputy governor. The report adds that the NB website is constantly under development, in order to improve online accessibility to information about its activities and policy. Quarterly economic bulletins and periodic Working Papers about ongoing research are also available online.

Norway first became a subscriber to the IMF's SDDS in June 1996, and the SDDS website discloses that Norway meets or exceeds requirements for coverage, periodicity, and timeliness of its posted data. However, the website makes it clear that Norway avails itself of timeliness flexibility options in the area of general and central government operations data, and the periodicity flexibility option in the area of central government operations data. Advance-release calendars are available for all relevant datasets, as are summary methodologies.

Public availability of information on monetary policy.

II

According to the IMF's 2005 FSAP publication, Norway's monetary policy is "conducted in a transparent fashion" (p. 22) and this transparency was supported by a number of institutional reforms that had recently taken place. However, the assessment does not directly address Norway's compliance with this principle. Norway first became a subscriber to the IMF's SDDS in June 1996, and the SDDS website discloses that Norway meets or exceeds requirements for coverage, periodicity, and timeliness of its posted data. However, the website makes it clear that Norway avails itself of timeliness flexibility options in the area of general and central government operations data, and the periodicity flexibility option in the area of central government operations data. Advance-release calendars are available for all relevant datasets, as are summary methodologies.

According to the 2006 NB Annual Report, the Norges Bank Act requires the NB to "inform the public about the monetary, credit, and foreign exchange situation, and about the assessments on which monetary policy decisions are based" (p. 38) as well as the assessments that underlay monetary policy implementation. The report acknowledges the importance of "transparency and predictability" (p. 80) and recognizes that such transparency is key to improving policy predictability and effectiveness, thus enhancing stability. To this end, the NB now regularly offers webcast press conferences after each monetary policy meeting of the board of directors, and produces a variety of reports and publications on its website, as well as the text of addresses by the bank's governor and deputy governor. The report adds that the NB website is constantly under development, in order to improve online accessibility to information about its activities and policy. Quarterly economic bulletins and periodic Working Papers about ongoing research are also available online.

Accountability and assurances of integrity by the central bank.

II

In a 2005 FSAP publication by the IMF, Norway's monetary policy is said to be "conducted in a transparent fashion" (p. 22) and this transparency was supported by a number of institutional reforms that had recently taken place. However, the assessment does not directly address Norway's compliance with this principle. NB's statistics department is independent from interference by the bank or its board thanks to internal NB regulations, according to the IMF's 2003 ROSC. The ROSC also found that hiring, promotion, and salary policies contribute to a culture of professional competency among the statistics department staff, as does the department's ongoing educational efforts, comprising lectures, conferences, and the publication of papers on methodology. In addition, the ROSC found that the NB relies upon comprehensive accounting records -- both its own and those of other financial institutions. The data collection systems of the NB, the SSB, and the Banking, Insurance, and Securities Commission are coordinated, and there is sufficient detail in the monetary data to permit all financial instruments and economic sectors to be classified. Compilation techniques are such that duplication of reporting is kept to a minimum. The procedures yielding time-series data was also judged to be sound, as was Norway's use of modern technological aids in the area of data processing and validation. The 2003 ROSC adds that "regular assessment and validation of source and intermediate data are undertaken, and revision studies take the form of notes describing investigations of sources of errors" (p. 15). The NB's statistical department also fosters methodological and analytical research, the result of which is published in the form of Working Papers that are publicly available on the NB website.