Norway and Its Economic Policies

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Analytical essay on the Norwegian economic policies

Written by: József Gazsó Module leader: Péter Bárczy Module: Economic Policies Wordcount: 3200

The purpose of this essay is to examine Norway from the perspective of its economic policies. I am trying to pay special attention to its recession resolution technique in order to understand better why this country could preserve itself against the most severe financial crisis of the last few decades. The reason why I picked Norway as a topic is because I lived half-a-year there as an exchange student. Apparently, I was there when the crisis was the most threatening to all the European countries (in the autumn semester of 2008). However, I did not notice huge changes in the
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The largest controversy regarding monetary policy in 2009 was probably the rate cut in June, and to a lesser extent in May. By then, the economy had begun showing signs of improvement, the government’s expansionary fiscal policy was just starting to have an impact, and the financial markets had improved rapidly on the back of lower interest rates, government guarantees and ample liquidity. Along with the strong signs that the economy was improving, there were growing concerns that the extraordinarily low interest rates could initiate a housing market bubble. House prices started to increase in January 2009, and have continued to climb gradually back to their pre-crisis levels. Some leading indicators and the strong recovery in the financial and asset markets suggested an earlier recovery than what Norges Bank emphasized at that time.

After the August meeting, Norges Bank communicated clearly its intention to start its exit strategy. Norges Bank wanted to withdraw the extraordinary measures first and then hike rates. On October 28, Norges Bank hiked rates by 25 basis points to 1.5 per cent and signalled that rates would be hiked by a further 25 basis points either in December 2009 or February 2010 as for the monetary policy reports is the following: Due to strong economic data, recovering financial markets, rising house prices and a lack of pass-through from the previous policy rate hikes to mortgage and corporate rates, Norges Bank hiked
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