Guest lectures

Question 1

Name the 6 aspects why interest rates are historically low.

Answer 1

(1) demographics
(2) lower productivity growth
(3) lower capital goods prices
(4) increased inequality & effect on trend growth and on savings supply
(5) global savings glut
(6) public debt (leading to reduced public investment)

Question 2

What are the 4 pillars of stabilization policy in Norway?

Answer 2

• oil fund mechanism
• the fiscal rule
• floating exchange rate
• Inflation target

Question 3

What are the 5 Megatrends the global economy currently faces?

Answer 3

1. shift in economic power
2. climate change
3. technological advancements
4. demographic change
5. urbanisation

Question 4

Briefly mention the most important risk factors for the global economy.

Answer 4

• geopolitical risks
• trade war
• political polarisation & disfunctional domestic policies
• too aggressive interest rate hikes
• countries/regions will likely face coming recessions with limited fiscal & monetary ammunition
• debt & financial bubbles
• disruption caused by technological innovations

Question 5

What are the long-run effects of monetary policy?

Answer 5

• determining the average level of inflation

- markets, capital, labour & technology determine production

Question 6

Flexible inflation targeting…

Answer 6

…ensures a nominal anchor and smooths the cycle in production & employment.

Question 7

What are instruments for financial stability?

Answer 7

1. capital requirements
2. liquidity requirements
3. mortgage regulation
4. risk weights (NB acc. to presenter part of capital requirements)

Question 8

Why does the pension fund only invest abroad? (part I; MP & FiscP)

Answer 8

Monetary considerations: current account surplus = export of capital; domestic investment could destabilize mainland economy

Fiscal consideration: no “budget N°2”

Question 9

Why does the pension fund only invest abroad? (part II; InvPers, Sectoral balance perspective & Diversificatoin)

Answer 9

Investment perspective: risk of subsidizing domestic investment; the return abroad is alternative return for real investment in Norway

Sectoral balance perspective: balance btw. domestic sectors; prevent Dutch disease

Diversification: the government is already a big owner in domestic companies