Macroeconomics

Research in this area studies the Norwegian economy in the short, medium and long run. Research within this area covers a wide range of topics related to economic growth and development, business cycles, and macroeconomic policy. Important workhorses include large-scale macroeconomic models that act as information repositories used in macroeconomic forecasts, long-run projections and policy analysis.

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Ongoing research

Macroeconometric model for the Norwegian economy (KVARTS)  

KVARTS is a large macroeconometric model used for quarterly business cycle forecasts and policy analyses in the short and medium term. The model is based on the national accounts' conceptual apparatus and definitional contexts. In particular, KVARTS uses cross-cycle contexts that link access and use of products to various activities in the economy. The version used today describes the development in 15 mainland industries and 3 public production sectors. In the long term, the model is based on the fact that economic development is governed by supply-side factors. The behavioral relationships that describe the supply side of the economy are largely consistent with established economic theory. Short-term cyclical fluctuations are mainly determined by the development in aggregate demand. As in other large macroeconometric models, the behavioral relationships in KVARTS are estimated separately, and not as a system.

 

Norwegian fiscal policy analysis model (NORA) 

NORA (NORwegian fiscal policy Analysis model) is a macroeconomic model that can be used to analyze how fiscal policy affects key macroeconomic variables in the medium term. NORA is based on microeconomic theory and quantified on Norwegian data. The model describes overall relationships in the Norwegian economy, with a detailed description of how different tax rates and different expenditures in the national budget affect the economy.

 

Fiscal policy and population ageing (DEMEC)

Aging populations pose a challenge to the fiscal and macroeconomic stability of many societies through increased government spending on pension, healthcare, and social benefits programs for the elderly. This may hurt economic growth and overall quality of life if governments need to divert public spending from education and infrastructure investment to finance programs for the elderly. In addition, the recent economic crisis not only increased the demand for social protection but it also drew attention to population aging issues as many countries faced unsustainable public debts. In many nations, the already-high public spending limits the fiscal possibilities for increased aging-related spending in the long run. Therefore, policy solutions are necessary to ensure fiscal and macroeconomic sustainability as well as the health and well-being of citizens of all ages.

 

The Macroeconomics of Wealth Inequality

Across countries, a small fraction of the population controls a large and growing share of the economy's wealth. Thus, inequality has risen to the forefront of current academic, popular, and policy debates. The field of macroeconomics has made progress to understand the level and growth of wealth inequality, but large pieces of the picture are still missing. In particular, little is known about the macroeconomic consequences of inequality itself and the drivers behind it. For instance, the dominant models used to analyze monetary and fiscal policy still largely ignore household heterogeneity. This project aims to unveil the underlying factors behind the dynamics of inequality, and to assess the macroeconomic consequences of these forces and wealth inequality itself. The main challenge to scientific progress in this field is to utilize high-quality data in combination with precise theory on how heterogeneity affects economic aggregates. When called for, new models must be developed consistently with micro-level facts. 

 

Inequality in 3D – measurement and implications for macroeconomic theory

The EU-funded project 3D-In-Macro aims to contribute towards a better understanding of inequality and its macroeconomic implications. Using microdata, the project members will study the economy down to the household level along three important dimensions: consumption, income and wealth. The overarching aim of the project is to quantify the type of micro-heterogeneity that matters for macroeconomic theory and thus assist in the development of current and future macroeconomic models. Furthermore, a better understanding of the forces behind growing inequality may provide input to the current active debates on the issue, both within academia and among policy makers.

 

List of previous projects here.