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Non-linear dynamics in output, real exchange rates and real money balances: Norway, 1830-2003

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Author Info
Q. Farooq Akram () (Norges Bank)
Øyvind Eitrheim () (Norges Bank)
Lucio Sarno (Norges Bank)

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Abstract

We characterise the behaviour of Norwegian output, the real exchange rate and real money balances over a period of almost two centuries. The empirical analysis is based on a new annual data set that has recently been compiled and covers the period 1830{2003. We apply multivariate linear and smooth transition regression models proposed by Terasvirta (1998) to capture broad trends, and take into account non-linear features of the time series. We particularly investigate and characterise the form of the relationship between output and monetary policy variables. It appears that allowance for statedependent behaviour and response to shocks increases the explanatory powers of the models and helps bring forward new aspects of the dynamic behaviour of output, the real exchange rate and real money balances.

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Publisher Info
Paper provided by Norges Bank in its series Working Paper with number 2005/2.

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Length: 50 pages
Date of creation: 09 Jun 2005
Date of revision:
Handle: RePEc:bno:worpap:2005_02

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Related research
Keywords: Business cycles; real exchange rates; money demand; non-linear modelling; smooth transition regressions.;

Find related papers by JEL classification:
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
F31 - International Economics - - International Finance - - - Foreign Exchange

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