An empirical analysis of how oil price changes influence the Norwegian economy : a structural vector autoregressive approach

This thesis examines the relationships between disentangled oil price shocks and macroeconomic variables by utilizing structural vector autoregressions (SVAR). The first SVAR extends Killian`s (2009) analysis and supports his findings that shocks from oil-specific demand and aggregate economic activity leads to changes in real oil prices, while supply shocks have smaller effects. The second SVAR applies this methodology to Norway, a small, open and net oil-exporting country. Surprisingly, aggregate economic activity shocks have weak effects on the Norwegian economy which is in contrast to other net oil-exporters. Supply and oil-specific demand shocks significantly affects the unemployment and inflation rate respectively, while there is a time-varying effect on the interest rate dependent on whether there is a supply or an oil-specific demand shock