Norway tried for many years to make exchange rate targeting work, while also undertaking significant financial liberalisation, but its 1993-4 banking crisis pushed it towards a greater focus on price stability and more exchange rate flexibility, and it eventually adopted inflation targeting in 2001.
|Years||Targets and attainment||Classification|
|1974-87||currency associated with Snake to end-1978, with devaluations 1976, 1977 and 1978; then pegged to wider basket; basket changed 1982 and 1984, devaluations 1982, 1984, 1986; monetary policy initially operates mainly through direct and indirect effects on bank lending, but is complicated by monetary financing of budget deficits; bank lending control ended 1984 within wider process of financial liberalisation||loose exchange rate targeting LERT|
|1988-92||1988 change to more active forex intervention policy; tighter peg to basket, then from late 1990 to ecu, but peg abandoned end-1992; monetary policy operated mainly through interest rates||full exchange rate targeting FERT|
|1993-2000||banking crisis 1993-94; initial emphasis on exchange rate stability (in form of ‘implicit’ exchange rate band targeted mainly via interest rates), with medium-term objective of formally repegging; this gradually gives way to increased emphasis on price stability and greater exchange rate flexibility||loosely structured discretion LSD|
|2001-14||inflation target met on annual averages 12 years and near-met 1 year out of 14 (though headline CPI varies quite widely); 2004 undershoot not accompanied by sharp fall in inflation expectations; some refinements to IT procedures (increases in transparency) in early years||full inflation targeting FIT|
Selected IMF references: RED 1977 pp22-4; RED 1980 pp42-3; RED 1983 pp42-3, 63; RED 1984 pp45-8, 69-70; SR 1984 pp9-11; RED 1986 pp42-3; RED 1987 pp39-40; SR 1989 pp7-8; RED 1991 pp32-5; RED 1993 pp9-10, 27-9; RED 1995 pp15-16; SR 1996 pp6, 17-18; BP 1996 pp7-10; SR Jan 1998 pp11-13; SR Dec 98 pp13-16; SR 1999 pp26-7; SR 2002 pp25-7; SI 2002 ch. I; SR 2005 pp6, 9, 18.
Additional source: Kleivset (2012).
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