1
Asset prices and economic policy
Governor Svein Gjedrem Centre for Monetary Economics
12 September 2008
Norges Bank
2 2
-2.5 0 2.5 5
2002 2003 2004 2005 2006 2007 2008
-2.5 0 2.5 5
Sources: Statistics Norway and Norges Bank CPI
Inflation indicators
12-month rise. Per cent
CPIXE1)
1)CPIXE: CPI adjusted for tax changes and excluding temporary fluctuations in energy prices
3
-2 0 2 4 6
1970 1975 1980 1985 1990 1995 2000 2005
-2 0 2 4 6
Sources: Statistics Norway and Norges Bank
Economic growth
Annual growth in volume. Mainland GDP. Per cent
Norges Bank
4
-10 0 10 20 30 40 50 60
1970 1980 1990 2000
0 10 20 30 40
2004 2005 2006 2007 2008
Romania Latvia Estonia Lithuania Poland
Registered employees from new EU countries
In thousands. As of August
Population growth and net inward migration
In thousands
Population growth
Net inward migration
Sources: Statistics Norway and Central Office – Foreign Tax Affairs
5
Hourly productivity, mainland Norway
4-quarter growth. 5-quarter moving average. Per cent
0 1 2 3 4 5
1997 1999 2001 2003 2005 2007 0 1 2 3 4 5
Average 97 Q1 – 08 Q2
Sources: Statistics Norway and Norges Bank
Norges Bank
6
80 100 120 140 160 180 200
1995 1997 1999 2001 2003 2005 2007
80 100 120 140 160 180 200
Traditional goods and services Total
Sources: Statistics Norway and Norges Bank
Terms of trade
4-quarter moving average. Index, 1995=100
7
LFS unemployment and wage share 1)
Per cent
60 64 68 72 76 80
1985 1989 1993 1997 2001 2005
0 2 4 6 8
Sources: Statistics Norway, The Technical Reporting Committee on Income Settlements and Norges Bank
Wage share (left-hand scale)
Unemployment (right-hand scale)
1)Wages as a share of factor income in market-oriented mainland enterprises
Norges Bank
8
0 1 2 3 4 5
2006 2007 2008 2009 2010 2011 0 1 2 3 4 5 -3
-2 -1 0 1 2 3 4 5
2006 2007 2008 2009 2010 2011 -3 -2 -1 0 1 2 3 4 5
0 1 2 3 4 5 6 7 8 9
2006 2007 2008 2009 2010 2011 0 1 2 3 4 5 6 7 8 9
0 1 2 3 4 5 6 7
2006 2007 2008 2009 2010 2011 0 1 2 3 4 5 6 7 90%
70%
50%
30%
Baseline scenario i MPR 2/08
Sources: Statistics Norway and Norges Bank Output gap
CPIXE1) CPI
Key policy rate
1) CPIXE: CPI adjusted for tax changes and excluding temporary fluctuations in energy prices
9
0.0 0.2 0.4 0.6 0.8 1.0 1.2
Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 0.0 0.2 0.4 0.6 0.8 1.0 1.2
Difference between 3-month money market rates and expected key policy rate 1)
Basis points, 5-day moving average
1)Expected key policy rate is derived from Overnight
Indexed Swap (OIS) rates Sources: Bloomberg, Thomson Reuters and Norges Bank US
Norway
Norges Bank
10
0.0 0.2 0.4 0.6 0.8 1.0 1.2
Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 0.0 0.2 0.4 0.6 0.8 1.0 1.2
1)Expected key policy rate is derived from
Overnight Indexed Swap (OIS) rates Sources: Bloomberg, Thomson Reuters and Norges Bank US
Norway
Difference between 12-month money market rates and expected key policy rate 1)
Basis points, 5-day moving average
11
0 20 40 60 80
0 20 40 60 80
Sources: Northern Rock, Roskilde Bank, Norges Bank Northern Rock 30 June 2007
Roskilde Bank 31 March 2008 Norwegian banks 30 June 2008 The five Norwegian banks with the lowest ratio
Deposit-to-loan ratio (customer deposits / lending to customers) in distressed banks in the quarter before the crisis and in Norwegian banks
today. Per cent
Norges Bank
12
-5 0 5 10 15 20 25
2002 2003 2004 2005 2006 2007 2008
-5 0 5 10 15 20 25
Households Non-financial enterprises
Credit to households and enterprises
12-month growth. Per cent
Sources: Statistics Norway and Norges Bank
13
House prices
12-month rise. Per cent
-20 -15 -10 -5 0 5 10 15 20 25 30
2001 2002 2003 2004 2005 2006 2007 2008
-20 -15 -10 -5 0 5 10 15 20 25 30
Sources: Thomson Reuters, Associations of Norwegian real estate agents (NEF, EFF), ECON Pöyry and Finn.no US
UK
Norway
Norges Bank
14
0 2 4 6 8 10 12
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 0 2 4 6 8 10 12
Equity ratio Tier 1 capital ratio
Sources: Kredittilsynet and Norges Bank
1)All banks except branches of foreign banks in Norway. Equity ratio before 1990 Q1 for all banks.
Banks’ 1) capital adequacy and equity ratio
Per cent
15
Branches of foreign banks’ membership in the Norwegian Banks’ Guarantee Fund
SEB (Sweden) GE Money Bank
(Sweden) Citibank (UK)
BNP Paribas (France) Handelsbanken
(Sweden) Skandiabanken
(Sweden) Landsbanki
(Iceland) Swedbank
(Sweden) Nordnet Bank
(Sweden) Fokus Bank
(Denmark) Kaupthing Bank
(Iceland)
Has not applied Applied per
September 2008 Member 2008
Member 2007
Norges Bank
16
Norges Bank’s recommended revisions in the Norwegian guarantee scheme:
• Member banks must always pay a fee
• The membership fee is differentiated more clearly according to banks’ risk exposure
• …and thus becomes counter-cyclical by using growth in banks’ activity as a supplemental measure of risk exposure
• A reduction in the guaranteed amount per customer
• An increase in the notice of withdrawal for voluntary members from one to two years
• Branches of foreign banks pay to the extent possible
a membership fee according to the same rules as
Norwegian banks
17
0 200 400 600 800 1000 1200 1400
1993 1995 1997 1999 2001 2003 2005 2007 0 200 400 600 800 1000 1200 1400
Actual fee Alternative fee system
Sources: Kredittilsynet and Norges Bank
Fees to the Norwegian Banks’ Guarantee Fund
In millions of NOK
18
Norges Bank
