Oil price shocks and the Norwegian effective exchange rate – an SVAR approach
- Author:
- Saskia Ter Ellen and Kjetil Martinsen
- Series:
- Staff Memo
- Number:
- 16/2016
We employ a structural VAR model to investigate direct and indirect effects of oil price changes on the Norwegian effective exchange rate (I44). The model is estimated on different subsamples and with different model specifications. Our main finding is that the direct effect of oil price shocks on the I44 has increased over time, independent of the model specification we choose. Furthermore, an increasing impact of oil shocks on interest rates and an increased impact of interest rates on the I44 account for the rise in the indirect impact of oil on the I44 over time. We further find that long (short) term interest differentials become relatively more (less) important for explaining movements in the I44 during recent samples. A possible interpretation could be the (zero) lower bound and unconventional monetary policy conducted by Norway's trading partners.
Staff Memo inneholder utredninger og dokumentasjon skrevet av Norges Banks ansatte og andre forfattere tilknyttet Norges Bank. Synspunkter og konklusjoner i arbeidene er ikke nødvendigvis representative for Norges Bank.
ISSN 1504-2596 (online)