Working Paper

Financial imbalances, crisis probability and monetary policy in Norway

Author: Ragna Alstadheim, Ørjan Robstad and Nikka Husom Vonen
Series: Working Paper
Number: 21/2017

Working Paper 21/2017 (PDF 632.4 Kb)


We assess the strength of the impact of a monetary policy shock on financial crisis probability in Norway. Policy effects go via the interest rate impact on credit, house prices and banks' wholesale funding. We find that the impact of a monetary policy shock on crisis probability is about 10 times larger than what previous studies suggest. The large impact is mostly due to a fall in property prices and banks' wholesale funding in response to a contractionary monetary policy shock. In contrast, and in line with existing literature, there is a more limited contribution to reduced crisis probability from the impact of monetary policy on credit.

Published 26 October 2017 10:50