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The dynamics of energy prices and the Norwegian economy: A common trends and common cycles analysis

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  • Vatsa, Puneet
  • Basnet, Hem C.

Abstract

Considering the significance of the oil and gas sector to the Norwegian economy, this study investigates the short-term and long-term associations between crude oil and natural gas prices, and the real GDP of Norway. To this end, we employ a common-feature-based, multivariate trend-cycle decomposition approach to examine common trends and common cycles between them. Upon isolating the trend and cyclical components of the three series, this study finds a negative association between the real GDP and the two energy prices both in the short-run as well as in the long-run. This result contradicts the commonly-held view that the performance of energy-exporting economies is positively associated with energy prices. The test results also find that the cycles of natural gas prices follow the cycles of oil prices.

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  • Vatsa, Puneet & Basnet, Hem C., 2020. "The dynamics of energy prices and the Norwegian economy: A common trends and common cycles analysis," Resources Policy, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:jrpoli:v:68:y:2020:i:c:s0301420720302920
    DOI: 10.1016/j.resourpol.2020.101791
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    More about this item

    Keywords

    Energy prices; Crude oil; Natural gas; Common trends and common cycles; Time-series; Norway;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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