 Current account, productivity and terms of trade shocks in NorwayApplied Economics Letters, 2011, vol. 18, issue 18, 1745-1750 Abstract: Economic theory suggests that a permanent rise in terms of trade should result in a permanent rise in the standard of living. The increase comes from a permanent rise in productivity following an efficient reallocation of resources in a frictionless economy. This article presents Norway as a counterexample using three-variable Structural Vector Moving Average (SVMA) with long-run restrictions. The results show that permanent shocks to terms of trade improve the current account and have almost no effect on the output per capita growth. An over-identification test that restricts the permanent shocks to terms of trade to have only temporary effects on output per capita growth cannot be rejected as well. Overall, those shocks that have permanent effects on terms of trade or output per capita growth do not have permanent effects on each other. The empirical evidence suggests that strong intersectoral rigidities to reallocation of resources are present in Norway. Date: 2011 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:18:y:2011:i:18:p:1745-1750 Ordering information: This journal article can be ordered from DOI: 10.1080/13504851.2011.562154 Access Statistics for this article Applied Economics Letters is currently edited by Anita Phillips More articles in Applied Economics Letters from Taylor & Francis Journals |
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