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The Impact of Oil Prices on the Exchange Rate and Economic Growth in Norway

Usama Al-mulali ()

MPRA Paper from University Library of Munich, Germany

Abstract: This 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.

Keywords: Oil Price; Real Exchange Rate; Economic Growth; VAR (search for similar items in EconPapers)
JEL-codes: E30 F31 Q43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-mac
Date: 2010-08-03
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https://mpra.ub.uni-muenchen.de/24447/1/MPRA_paper_24447.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/24478/1/MPRA_paper_24478.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/26257/1/MPRA_paper_26257.pdf revised version (application/pdf)

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