Oil Wealth and Real Exchange Rates: The FEER for Norway

Arbeitspapier

It is often argued that Norway's sizeable net foreign assets based on its petroleum wealth imply an appreciation of its real exchange rate to a permanently strong level. We investigate this issue within the framework of the fundamental equilibrium real exchange rate (FEER) approach. It is shown that the strength of the FEER depends on the share of imports that can be financed by petroleum (based) revenues. Projections of the FEER over a long horizon suggest that the petroleum wealth implies a stronger equilibrium exchange rate than the rate that would have balanced (non-petroleum) foreign trade in each period. However, the FEER depreciates steadily over time with growth in imports relative to petroleum revenues and converges towards the rate that balances foreign trade. A permanently strong FEER presupposes that e.g. imports stay constant over time. Our results are in accord with the behaviour of the real exchange before and after the discovery of Norway's petroleum resources.

Angaben zum Objekt

• ISBN: 82-7553-270-1
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 2004/16

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Forecasting Models; Simulation Methods ; Foreign Exchange ; Open Economy Macroeconomics
• Thema: FEER ; equilibrium real exchange rate ; econometric analysis

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Akram, Q. Farooq
• Ereignis: Veröffentlichung
• (wer): Norges Bank
• (wo): Oslo
• (wann): 2004

Weitere Informationen

• Handle: http://hdl.handle.net/10419/209841
• Letzte Aktualisierung: 10.03.2025, 11:46 MEZ