Effects of the trilemma policies on inflation, growth and volatility in Norway
by Yu Hsing
International Journal of Economics and Business Research (IJEBR), Vol. 6, No. 4, 2013

Abstract: This paper finds support for the trilemma for Norway, suggesting that the three trilemma policies - exchange rate stability, monetary independence and financial integration - have a tradeoff. Although the policy combination of exchange rate stability and monetary independence was dominant in 2010, the other two policy combinations were also prevalent in recent years. There has been a converging trend among the three trilemma policy combinations. Norway chooses a middle ground approach as represented by a managed float with adequate foreign reserves to back up, moderate monetary autonomy, and medium level of financial integration. More exchange rate stability has a positive impact on the growth rate, and more financial integration causes the inflation rate and inflation volatility to decline. More monetary independence does not affect inflation, growth and volatility.

Online publication date: Mon, 30-Dec-2013

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