In particular, the model features wage bargaining between a union representing workers and firms in the tradeable sector to capture the institutional framework for wage setting in Norway, a sovereign wealth fund—the Government Pension Fund Global (GPFG)—and related constraints on the use of resources from the GPFG for fiscal financing purposes, and a rich description of the fiscal authority in Norway and its links with the rest of the economy. The model parameters are determined partly through a calibration of the model’s steady state to long-run averages in the data and partly through Bayesian estimation using quarterly time series for the Norwegian economy for the period 1999Q1 to 2019Q4. In the documentation the properties of the model are illustrated by showing how it responds to some common macroeconomic shocks, by presenting a number of fiscal policy simulations that illustrate typical use cases, and by comparing fiscal multipliers with those from existing models.

Head: Håkon Tretvoll

Participants:

Previous participants:

  • Thor Andreas Aursland, Norges bank
  • Ivan Frankovic, Bundesbank
  • Inga Heiland, NTNU
  • Birol Kanik, Konjunkturinstitutet
  • Magnus Saxegaard, IMF

Funder: Ministry of Finance

Current version

The current version of the model that we use is NORA 2.2. This version is based on the last publication of the documentation and NORA 2.1 described below. We have also made the following changes:  

  • The structure of exports have changed. In this version the intermediate goods producers in the manufacturing and services sectors export some of their production directly.
  • The intermediate goods producers set two prices: one domestic price and one price in foreign currency.
  • We have updated the oil price equation to be a function of the lagged oil price.
  • Parameters are reestimated given these changes.
  • Some minor bugs have been fixed.

NORA 2.1 included the following changes:

  • Wage bargaining is modified to involve bargaining over the product real wage instead of the consumer real wage.
  • The Taylor rule is forward looking and is specified as a function of expected inflation and the expected output gap.
  • Parameters were reestimated given these two changes.

Documentation

NORA 2.0 is documented in Documents 2024/4.

Research and analysis

Brasch, T., I. Frankovic and E. Tölö (2022): Corporate taxes and investment when firms are internationally mobile. International Tax and Public Finance

Aursland, T. A., I. Frankovic, B. Kanik and M. Saxegaard (2020): State-dependent Fiscal Multipliers in NORA - A DSGE Model for Fiscal Policy Analysis in Norway, Economic Modelling