On the Exchange Rate Dynamics of the Norwegian Krone

Morten Risstad (), Airin Thodesen, Kristian August Thune and Sjur Westgaard
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Morten Risstad: Department of Industrial Economics and Technology Management, Faculty of Economics, Norwegian University of Science and Technology (NTNU), Alfred Getz v. 3, 7034 Trondheim, Norway
Airin Thodesen: Department of Industrial Economics and Technology Management, Faculty of Economics, Norwegian University of Science and Technology (NTNU), Alfred Getz v. 3, 7034 Trondheim, Norway
Kristian August Thune: Department of Industrial Economics and Technology Management, Faculty of Economics, Norwegian University of Science and Technology (NTNU), Alfred Getz v. 3, 7034 Trondheim, Norway
Sjur Westgaard: Department of Industrial Economics and Technology Management, Faculty of Economics, Norwegian University of Science and Technology (NTNU), Alfred Getz v. 3, 7034 Trondheim, Norway

JRFM, 2023, vol. 16, issue 7, 1-18

Abstract: Global energy production is undergoing a transition from fossils to renewables. At the same time, the Norwegian Oil Fund has grown exponentially in size and is now a major global investor. These events in combination are likely to impact the dynamics of the Norwegian krone. Concurrently, the persistent weakening of the Norwegian krone (NOK), hitting record low exchange rates against the major currencies, is sparking national and international interest. Using updated data, we find that oil prices and global asset prices are both important drivers of EURNOK returns. However, we find that the relative importance changed following the 2015 oil price decline, whereafter asset prices became more significant. Furthermore, we observe an impact of investor risk aversion, suggesting that the krone is no longer a safe-haven currency.

Keywords: foreign exchange; risk aversion; time-varying dependencies (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
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