The Impact of Oil Prices on the Exchange Rate and Economic Growth in Norway
AbstractThis study examines the impact of oil shocks on the real exchange rate and the gross domestic product in Norway using time series data from 1975 to 2008. The vector autoregressive has been implemented using the cointegration and the Granger causality test. The results of the study show that the increase in oil price is the reason behind Norway’s GDP increase and the increase of its competitiveness to trade by its real exchange rate depreciation. So it seems that oil price in this case is a blessing due to two reasons. First Norway uses the floating exchange rate regime which is a good shock absorber, increases the freedom of the monetary authority, and makes the adjustment smoother and less expensive. The second reason is that Norway has more flexible labor markets, improvements in monetary policy and smaller share of oil in production.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 24447.
Date of creation: 03 Aug 2010
Date of revision:
Oil Price; Real Exchange Rate; Economic Growth; VAR;
Find related papers by JEL classification:
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- F31 - International Economics - - International Finance - - - Foreign Exchange
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-28 (All new papers)
- NEP-ENE-2010-08-28 (Energy Economics)
- NEP-MAC-2010-08-28 (Macroeconomics)
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