Norges Bank

Staff Memo

Two essays on the magic number 4

Would the simple 4 per cent rule have uncovered that there was a crisis in the offing?
The aftermath of the recent financial crisis has demonstrated that lax fiscal policy may have widespread and severe consequences. In this paper, we examine how selected variables may be useful indicators of an unsustainable fiscal/economical condition.

When is the banking industry too large?
A government may have only a limited capacity to rescue its banking sector if a crisis should occur. Based on the experiences from the recent international crisis, this note discusses how large the banking sector can become before the rescue capacity of the government becomes insufficient.

Author:
Sigbjørn Atle Berg, Jan F. Qvigstad and Nikka Husom Vonen
Series:
Staff Memo
Number:
2/2011

Staff Memos present reports and documentation written by staff members and affiliates of Norges Bank, the central bank of Norway. Views and conclusions expressed in Staff Memos should not be taken to represent the views of Norges Bank.

ISSN 1504-2596 (online)

Published 28 February 2011 15:00
Published 28 February 2011 15:00