Norges Bank Watch 2007
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The Norwegian economy presents some unique challenges for monetary policy, not only because it is smaller and more open than most, but also because of the many supply shocks that the country has experienced in recent years, such as the rise in oil prices, the sharp decline in the prices of imported consumer goods, the substantial inflow of foreign workers, and important productivity improvements in key sectors. This contrasts with the common emphasis on demand shocks in monetary-policy studies and serves as an important reminder that the objective of monetary policy is not to prevent businesscycle fluctuations, but to help the economy attain its full potential. In the presence of supply shocks, this potential does not develop smoothly over time, but is itself subject to fluctuations.