Effects of the trilemma policies on inflation, growth and volatility in Norway

Yu Hsing

International Journal of Economics and Business Research, 2013, vol. 6, issue 4, 411-418

Abstract: This paper finds support for the trilemma for Norway, suggesting that the three trilemma policies - exchange rate stability, monetary independence and financial integration - have a tradeoff. Although the policy combination of exchange rate stability and monetary independence was dominant in 2010, the other two policy combinations were also prevalent in recent years. There has been a converging trend among the three trilemma policy combinations. Norway chooses a middle ground approach as represented by a managed float with adequate foreign reserves to back up, moderate monetary autonomy, and medium level of financial integration. More exchange rate stability has a positive impact on the growth rate, and more financial integration causes the inflation rate and inflation volatility to decline. More monetary independence does not affect inflation, growth and volatility.

Keywords: trilemma policies; exchange rate stability; ERS; monetary independence; financial integration; inflation; growth; volatility; Norway; tradeoffs. (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijecbr:v:6:y:2013:i:4:p:411-418

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