Tag Archives: Peterson Institute for International Economics

Central Bank Of Norway Call For A New "Global Order"

Governor of Central Bank of Norway, Svein Gjedrem, purpose to merge the activities of G20 and IMF in creating a new financial architecture. In a speech held at the Peterson Institute for International Economics in Washington, Thursday,  Mr Gjedrem said that a “statutory-based and representative global order” should be one of the main objectives of the discussions on changes in the international financial markets.

“The IMF has played a pivotal role in presenting the initial lessons from the crisis, in providing finance to countries with temporary balance of payments needs. When the good times return, we must avoid memory failure and remember these facts of life.”

Svein Gjedrem

Photo: Nancy Bundt/Norges Bank

A Multilateral approach is needed to deal with the global challenges. That was the main message from governor Svein Gjedrem of Central Bank of Norway in his speech at the Peterson Institute for International Economics in Washington, Thursday. He draws a picture of a new global financial world with the International Monetary Fund, IMF, in the center.

“At the end of the Second World War, 45 countries agreed to establish a new international financial and economic order with the Bretton Woods Institutions, the IMF and the World Bank, at its center. In his inaugural speech to the Bretton Woods Conference in 1944, US Treasury Secretary Henry Morgenthau noted the following:”

“We know that economic conflict must develop when nations endeavor separately to deal with economic ills which are international in scope. To deal with the problems of international exchange and of international investment is beyond the capacity of any one country, or of any two or three countries. These are multilateral problems, to be solved only by multilateral cooperation. They are fixed and permanent problems, not merely transitional considerations of the post-war reconstruction. They are problems not limited in importance to foreign exchange traders and bankers but are vital factors in the flow of raw materials and finished goods, in the maintenance of high levels of production and consumption, in the establishment of a satisfactory standard of living for all the people of all the countries on this earth.”

“It is perhaps time to honor some fundamental principles,” Mr Gjedrem said in his speech at the Peterson Institute.

The governor of the Central Bank of Norway did stretch as far as to paint a picture of how he thinks a new global financial world should look like.

Mr. Gjedrem’s new world would revolve around the IMF.

“During the crisis, the IMF proved its ability to respond promptly and effectively to very challenging developments.”

“I therefore submit that a statutory-based and representative global order should be one of the main objectives of the discussions on changes in the international financial architecture.”

“I have presented my view on the prevailing international economic order which I find deficient in important respects. The G20 played a vital role in the response to the global crisis and the rest of the world depends on its successful cooperation. With the world recovering from crisis, the G20 should merge its activities with those of the IMF. That will give them both wider acceptance and legitimacy.”

“I’ve described some characteristics of Norway and emphasised our history of active support of multilateral institutions and collaboration. Currently, we do not participate where decisive discussions take place on international economic and financial issues and cooperation, including changes in the governance of the IMF. Yet we are called upon to make relatively large contributions to efforts agreed by a non-statutory body.”

Svein Gjedrem emphasize certain key principles:

  • First, systemically important countries need to collaborate effectively on consistent economic policies. Their success is vital not only for their own good, but also for that of others, including small open economies.
  • Second, this collaboration should be anchored in a multilateral and statutory-based system of representation, for example through constituencies, where smaller countries would participate, even if indirectly.
  • Third, the constituencies should have rotating representation, where small countries, at least periodically, could participate directly.

“Without such a global order, the interest in contributing to international efforts is certain to diminish. There can be no taxation without representation.”

“The IMF has played a pivotal role in presenting the initial lessons from the crisis, in providing finance to countries with temporary balance of payments needs, and in preparing the overall framework for the international policy response.”

“When the good times return, we must avoid memory failure and remember these facts of life.”

Here’s a full transcript of the speech.

Related by the Econotwist:

Evaluation Of Norwegian Monetary Policy

Final Words Of A Central Banker

Nordic Central Banks Agree On Baltic Bank Bailout

Norway: Key Policy Rate Remains Unchanged

Fear Of Norwegian Housing Market Collapse

Central Bank of Norway raise interest rate again

C.B.of Norway: “All Banks Must Be Allowed To Fail”

Norway: Most Banks Fail In Stresstest

Reason To Worry

Norges Bank urges banks to reduce liquidity risks

Norway’s New Bubble

“The Norwegian Syndrome”

Central Bank of Norway: “Transparency Is Difficult”

Not So Rosy After All

The Art of Interest

Central Bank of Norway Reverse Easing

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Evaluation Of Norwegian Monetary Policy

The independent research committee, Norges Bank Watch, have released their annual evaluation of Norwegian monetary policy, conducted by the Central Bank of Norway. The committee considers the Central Bank’s assessment of the Norwegian economy over all to be well balanced in the first half of 2009, but have a few remarks on credibility and transparency.

“It was good luck that the oil price (in USD) doubled in the course of 2009.”

Norges Bank Watch


Why are the Norwegian central bank‘s inflation forecasts persistently higher than the ones from the Norwegian Bureau of  Statistics?

The research committee, Norges Bank Watch, does not provide an answer to the question, but says it is “surprised” by the fact.

“A comparison of the forecasts by Norges Bank with those by Statistics Norway show that already in the beginning of 2009, both institutions quickly understood that the Norwegian recession would be much milder than the great international recession. However, there has been a clear (and to us surprising) tendency that Statistics Norway forecast a persistently lower inflation than Norges Bank for the period 2009 – 2011,” Norges Bank Watch writes in the 2009-edition, released recently.

Dumb Luck?

“The international financial crisis did temporarily cut off many Norwegian banks from international funding, but this problem was manageable, and was fixed without any sizeable credit crunch. Finally it was good luck that the oil price (in USD) doubled in the course of 2009 and that the Norwegian manufacturing sector is relatively small, quite capital intensive, and not much involved in producing consumer durables.”

The committee has evaluated monetary policy in the first half of 2009 as being part of the Norwegian authorities’ management efforts to counter the negative effects of the financial crisis on the Norwegian economy.

These were followed by an “exit strategy” phase in which Norges Bank began to signal a return to higher rates, as it scaled back the crisis measures and eventually started to hike rates in October.

“The central bank’s rhetoric and actions in the period since the August interest rate meeting have been part of this exit strategy, in our view.”

“After evaluating Norges Banks monetary policy, the committee considers Norges Banks assessment of the Norwegian economy over all to be well balanced in the first half of 2009. The two rate cuts in February and March reflected well the deterioration of the outlook of the Norwegian economy.”

“The committee would like to give Norges Bank credit for a quick and successful communication to the private sector when Norges Bank changed its view on the outlook for the Norwegian economy in August.”

“In the committee’s view, the October rate hike reflected well the more optimistic outlook of the Norwegian economy signaled by Norges Bank since August. Although the rate hike in December was somewhat surprising to the private sector, the committee believes it was appropriate to increase rates due to the lack of pass-through of of the previous rate hike to bank lending rates and a more favorable outlook of the economy.”

Okay, it’s a B+

Norges Bank Watch thinks the central bank in general have done a good job in handling “The Great Recession”.

But the committee have a few remarks of credibility and transparency.

Norges Bank has the last few years approached the frontier in monetary policy transparency by publishing the projected interest rate path.

Since the effect of a monetary policy decision depends on expected future decisions, the projected policy path is an integral part of the monetary policy stance.

“Only on the three occasions that they publish the Monetary Policy report do they update the forecasts.”

“The NBW committee suggests that Norges Bank keeps the number of monetary policy reports to three per year, but consider publishing a press release and a monetary policy update at least on one of the other meetings of the Executive Board. The monetary policy update should contain a limited number of forecasts for central macroeconomic variables.”

One (more) Voice?

“Currently, Norges Bank has decided to “speak with only one voice”. This has implied that only internal members (the Governor and Deputy Governor) have discussed the monetary policy decisions or issues related to the operation of monetary policy in public. We suggest that also the external members should be able to discuss issues related to the operation of monetary policy in public. This would contribute positively to the current debates about monetary policymaking in Norway.”

Here the executive summary.

Here’s a copy of the full report.

Governor Svein Gjedrem gives a speech at The Peterson Institute for International Economics in Washington, D.C, Thursday.

The speech will be published here at the Econotwist’s Blog at 7 pm, Norwegian time.

Related by the Econotwist:

Central Bank of Norway: “Transparency Is Difficult”

“The Norwegian Syndrome”

Norway’s New Bubble

Norges Bank urges banks to reduce liquidity risks

Reason To Worry

Norway: Most Banks Fail In Stresstest

C.B.of Norway: “All Banks Must Be Allowed To Fail”

Central Bank of Norway raise interest rate again

Fear Of Norwegian Housing Market Collapse

Norway: Key Policy Rate Remains Unchanged

Nordic Central Banks Agree On Baltic Bank Bailout

Final Words Of A Central Banker

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Filed under International Econnomic Politics, National Economic Politics