Import price formation and pricing to market: A test on Norwegian data

This paper investigates the determinants of Norwegian import prices of manufactures over the period 1970(1) - 1991(4). Multivariate cointegration analysis establishes a long-run relationship between import prices, foreign prices, the exchange rate and domestic unit labour costs. Normalized on import prices, the long-run elasticities are 0.63 (foreign prices and the exchange rate) and 0.37 (domestic costs). Deviations from this relationship are highly significant in a structural import price equation, which also contains positive effects of growth in domestic demand and inflation, as well as a negative effect from the Norwegian unemployment rate. The estimated parameters appear reasonably stable within the sample. Keywords: Import price formation, pricing to market, domestic effects, Johansen procedure, structural error correction model, super exogeneit

Evaluation of Norges Bank’s Projections for 2008

Inflation in 2008 was significantly higher than Norges Bank projected in autumn 2007. This was to a large extent due to an unexpected slowdown in productivity growth and to the rise in prices for commodities and manufactured goods abroad being unexpectedly high through to last autumn. In addition, capacity utilisation was higher than expected up until the summer. The global financial crisis led to weaker-than-projected exports and private demand in mainland Norway. Capacity utilisation was therefore lower than expected at the end of the year. The accuracy of Norges Bank’s projections of developments in 2008 was broadly in line with those of other forecasters

Etterprøving av Norges Banks anslag for 2008

Prisveksten i 2008 ble vesentlig høyere enn hva Norges Bank anslo høsten 2007. Det har sammenheng med at produktiviteten utviklet seg svakere enn ventet, og at prisene på råvarer og industrivarer i utlandet økte uventet mye fram til i fjor høst. I tillegg var kapasitetsutnyttingen høyere enn ventet fram til sommeren i fjor Den internasjonale finanskrisen bidro til at eksporten og den private etterspørselen i Fastlands-Norge utviklet seg svakere enn anslått. Kapasitetsutnyttingen var dermed lavere enn ventet ved slutten av året. Norges Bank anslo utviklingen i 2008 om lag like godt som andre prognosemakere

Etterprøving av Norges Banks anslag for 2008

Prisveksten i 2008 ble vesentlig høyere enn hva Norges Bank anslo høsten 2007. Det har sammenheng med at produktiviteten utviklet seg svakere enn ventet, og at prisene på råvarer og industrivarer i utlandet økte uventet mye fram til i fjor høst. I tillegg var kapasitetsutnyttingen høyere enn ventet fram til sommeren i fjor Den internasjonale finanskrisen bidro til at eksporten og den private etterspørselen i Fastlands-Norge utviklet seg svakere enn anslått. Kapasitetsutnyttingen var dermed lavere enn ventet ved slutten av året. Norges Bank anslo utviklingen i 2008 om lag like godt som andre prognosemakere

Modelling the demand for imports and domestic output

The paper models domestic output over imports in Norway’s expenditure on manufactures. Using Johansen’s (1988, 1991) method, we obtain a cointegrating vector between the output-imports ratio, relative prices and a proxy for international specialisation. This vector enters a conditional equilibrium correction model of the output-imports ratio; a model which also includes short-run influences of relative prices and a negative coefficient for domestic capacity utilisation. The utilisation coefficient aside, we do not find significant activity effects on the output-imports ratio. Lastly, the model passes several tests of the Lucas critique. Keywords: Import share, international specialisation, cointegration, Johansen procedure, equilibrium correction model, parameter constancy, Lucas critique

Evaluation of Norges Bank’s Projections for 2008

Inflation in 2008 was significantly higher than Norges Bank projected in autumn 2007. This was to a large extent due to an unexpected slowdown in productivity growth and to the rise in prices for commodities and manufactured goods abroad being unexpectedly high through to last autumn. In addition, capacity utilisation was higher than expected up until the summer. The global financial crisis led to weaker-than-projected exports and private demand in mainland Norway. Capacity utilisation was therefore lower than expected at the end of the year. The accuracy of Norges Bank’s projections of developments in 2008 was broadly in line with those of other forecasters