This paper analyses the transmission mechanisms of monetary policy in a small open economy like Norway through structural VARs, paying particular attention to the interdependence between the monetary policy stance and exchange rate movements in the inflation-targeting period. Previous studies of...

Dornbusch’s exchange rate overshooting hypothesis is a central building block in international macroeconomics. Yet, empirical studies of monetary policy have typically found exchange rate effects that are inconsistent with overshooting. This puzzling result has developed into a “styled...

We analyse the role of house prices in the monetary policy transmission mechanism in Norway, Sweden and the UK using structural VARs. A solution is proposed to the endogeneity problem of identifying shocks to interest rates and house prices by using a combination of short-run and long-run...

We use a dynamic factor model and a detailed panel data set with quarterly accounts data on all Norwegian banks to study the effects of banks’ funding costs on their retail rates. Banks’ funds are categorized into two groups: customer deposits and long-term wholesale funding (market funding...

We use a dynamic factor model and a detailed panel data set for six Norwegian bank groups to analyze i) how funding costs affect retail loan rates and ii) how retail rate differences between banks affect market shares. The data set consist of quarterly data for 2002Q1-2011Q3 and include...

This paper addresses cointegration in small cross-sectional panel data models. In addition to dealing with cointegrating relationships within the cross-sectional dimension, the paper explicitly addresses the issue of cointegration between cross-sections. The approach is based upon a well-known...