This paper investigates a long-run relation for the trade weighted NOK exchange rate. I find that the NOK Trade Weighted Index (TWI) cointegrates with the real oil price, the price differential and the real interest differential. The paper documents a long-run solution for the TWI. The paper’s...

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...

This paper analyzes how monetary policy responds to exchange rate movements in open economies, paying particular attention to the two-way interaction between monetary policy and exchange rate movements. We address this issue using a structural VAR model that is identified using a combination of...

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 analyze the role of house prices in the monetary policy transmission mechanism in the U.S. using structural VARs. The VAR is identified using a combination of short-run and long-run (neutrality) restrictions, allowing for a contemporaneous interaction between monetary policy and various asset...

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...

Can the central bank of a small open economy be mandated with the maintenance of both fixed exchange rates and monetary independence, and still succeed in the long term? Looking at a pioneering experiment put in place by the National Bank of Belgium, this article shows how foreign exchange...

Using the longest data set on FX order flow to date, along with the broadest coverage of currencies to date, we examine the effect of FX order flow on exchange rates across small and large currencies, currencies with floating or fixed regimes, and across both tranquil and turbulent periods. Over...

Using ten years of FX transactions data we demonstrate that a large share of the FX forward discount bias can be accounted for by order flow. A simple microstructure-based decomposition suggests that order flow creates a timevarying risk premium that is correlated with the forward discount. The...