Ragnar Nymoen

• PhD
• Professor (Full) at University of Oslo

We specify a multiple‐equation model with equilibrium‐correction terms, which connect inflation to the wage share and the functional income distribution, while not excluding a priori variables that are typically found in existing empirical U.S. Phillips curve models. We estimate the model equations using automatic variable selection with low Type‐1...

Counterfactual analysis of the impact of Covid-19 can be based on a solution of a macroeconomic model for a scenario without the coronavirus interfering with the macroeconomic system. Two measures of impact are introduced with the aid of a simple theoretical model, and then used in the empirical analysis: (Ⅰ) The difference between the counterfactu...

The non-causal (“forward-looking”) solution used routinely in academic macroeconomics may represent a violation of a law of entropy, namely that the direction of time is one way (from the past and towards the present), and that the variance of economic processes increases with time. In order to re-establish a degree of compatibility with the law of...

The specification of model equations for nominal wage setting has important implications for the properties of macroeconometric models that are used to aid economic policy decisions and as tools for forecasting. The modelling of the joint dependencies between wage and price adjustments , and their connections to variables like labour productivity a...

We model the empirical relationship between the within-establishment union membership rate and wage inequality in Norway. The data set is a panel of 2,285 private-sector establishments observed in the period 2000–18. The statistical model represents joint feedback between wage inequality and union membership. Dynamic panel data models are estimated...

Wage coordination plays an important role in macroeconomic stabilization. Pattern wage bargaining systems have been common in Europe, but in different forms, and with different degrees of success in terms of actual coordination reached. We focus on wage formation in Norway, a small open economy, where it is custom to regard the manufacturing indust...

The joint implication of the consumption Euler equation and cointegration between income and consumption is that savings predict future income declines, the ‘saving for a rainy day’ hypothesis. The empirical relevance of this hypothesis plays a key role in discussions of fiscal policy multipliers, and it holds under the null that the permanent inco...

We used a time-series cross-section dataset to test several hypotheses pertaining to the role of macroprudential policy instruments in the management of the financial cycle in advanced open economies. The short-run effects are most significant for caps on loan to value and income (LTV and LTI) and risk weights (RW). The long-run coefficients of cre...

In this report we study development of labor market crime in Norway between 1973 and 2015. Labor market crime is characterized by profit-driven crime in the labor market and includes for example violations of the Working Environment Act, tax evasion and social security fraud. There is an increasing awareness that labor market crime represents a ma...

This paper investigates potential invariance of mean forecast errors to structural breaks in the data generating process. From the general forecasting literature, such robustness is expected to be a rare occurrence. With the aid of a stylized macro model we are able to identify some economically relevant cases of robustness and to interpret them ec...

An important application in the real options literature has been in investments in the oil sector. Two commonly applied “stylized facts” in such applications are tested here. One is that the correlation of the returns on oil and the stock market is positive; the other that it is invariant to changes in oil price volatility. Both are rejected in dat...

This paper reviews the development of labour market institutions in Norway, shows how labour market regulation has been related to the macroeconomic development, and presents dynamic econometric models of nominal and real wages. Single equation and multi-equation models are reported. The econometric modelling uses a new data set with historical tim...

Norwegian Aggregate Model, NAM, is a dynamic econometric model developed to forecast and analyse the Norwegian macro economy. The documentation begins with chapters that give an overview of the model, and examples of NAM usage for forecasting and scenario analysis. Methodological issues in the construction of amacroeconometricmodel, and how they ha...

Purpose – A standard model of equilibrium unemployment consists of static equations for real-wage ambitions (wage curve) and real-wage scope (price curve), which jointly determine the NAIRU. The heuristics of the model states that unless the rate of unemployment approaches the NAIRU from any given initial value, inflation will be increasing or decr...

The ‘saving for a rainy day’ hypothesis implies that households’ saving decisions reflect that they can (rationally) predict future income declines. The empirical relevance of this hypothesis plays a key role in discussions of fiscal policy multipliers and it holds under the null that the permanent income hypothesis is true. We find mixed support f...

The econometrician Trygve Haavelmo pursued a research programme in macroeconomic theory that was highly original for its time. We present his macro model for an economy with deregulated financial markets and a policy determined interest rate path. Disequilibria arise in the interface between asset markets and the real economy. A mismatch between th...

We focus on the equilibrium unemployment rate as a parameter implied by a dynamic aggregate model of wage and price setting. The equilibrium unemployment rate depends on institutional labour market institutions through mark-up coefficients. Compared with existing studies, the resulting final equation for unemployment has a richer dynamic structure....

MOSES is an aggregate econometric model for Sweden, estimated on quarterly data, and intended for policy simulations and short-term forecasting. After a presentation of qualitative model properties, the econometric methodology is summarized. The model properties, within sample simulations, and forecast evaluations are presented. We also address met...

We present a framework for interpretation of the empirical results of New Keynesian models of inflation dynamics. Both the rational expectations solution of the structural New Keynesian Phillips curve, NKPC, and the reduced form VAR analysis of the multivariate time series properties give insight about the joint implications of the evidence in the...

Macroeconomic theories take polar views on the importance of choice versus chance. At the micro level, it seems realistic to assume that both dimensions play a role for individual employment outcomes, although it might be difficult to separate these two effects. Nevertheless the choice and chance dimension are seldom treated symmetrically in models...

Many economic models (such as the new-Keynesian Phillips curve, NKPC) include expected future values, often estimated after replacing the expected value by the actual future outcome, using Instrumental Variables or Generalized Method of Moments. Although crises, breaks and regime shifts are relatively common, the underlying theory does not allow fo...

This paper evaluates inflation forecasts made by Norges Bank which is a successful forecast targeting central bank. It is expected that Norges Bank produces inflation forecasts that are on average better than other forecasts, both naive forecasts, and forecasts from econometric models outside the central bank. We find that the superiority of the ba...

This paper evaluates inflation forecasts made by Norges Bank which is a successful forecast targeting central bank. It is expected that Norges Bank produces inflation forecasts that are on average better than other forecasts, both ’naive’ forecasts, and forecasts from econometric models outside the central bank. We find that the superiority of the...

MOSES is an aggregate econometric model for Sweden, estimated on quarterly data, and intended for short-term forecasting and policy simulations. After a presentation of qualitative model properties, the econometric methodology is summarized. The model properties, within sample simulations, and examples of dynamic simulation (model forecasts) for th...

MOSES is an aggregate econometric model for Sweden, estimated on quarterly data, and intended for short-term forecasting and policy simulations. After a presentation of qualitative model properties, the econometric methodology is summarized. The model properties, within sample simulations, and examples of dynamic simulation (model forecasts) for th...

This paper presents the business cycle model that Trygve Haavelmo developed as part of his research program in macroeconomic and monetary theory. Driven by a mismatch between the marginal return to capital and the rate of return required by capital owners, this model generates endogenous cycles. The theory leads to a distinct analysis of the scope...

The new-Keynesian Phillips curve (NKPC) includes expected future inflation to explain current inflation. Such models are estimated by replacing the expected value by the future outcome, using InstrumentalVariables or Generalized Method of Momentsmethods. However, the underlying theory does not allow for various non-stationarities–although crises, b...

We derive aggregate supply (AS) relationships for an intermediate-run macro model.The wage-price spiral provides the conceptual framework for a synthesis of different contesting theoretical and empirical perspectives on the AS curve: the Phillips curve model (PCM) and the wage-price equilibrium correction model (WPECM). The generalized AS curve is g...

We derive aggregate supply (AS) relationships for an intermediate-run macro model. The wage-price spiral provides the conceptual framework for a synthesis of different contesting theoretical and empirical perspectives on the AS curve: the Phillips curve model (PCM) and the wage-price equilibrium correction model (WPECM). The generalized AS curve is...

We investigate the economic significance of trading off empirical validity of models against other desirable model properties. Our investigation is based on three alternative econometric systems of the supply side, in a model that can be used to discuss optimal monetary policy in Norway. Our results caution against compromising empirical validity w...

The …rst part of this chapter sets out a coherent approach to dynamic macroecono- metric model building; the second part demonstrates the approach through building and evaluating a small econometric model; the …nal part demonstrates various usages of the model for policy.

Using a panel data set for OECD countries we replicate the typical features of the New Keynesian Phillips curve models (NPCs) that have been estimated on country data. While this corroborates the NPC also on the macro panel data set, a different conclusion is reached when we test whether the NPC encompasses an existing model of inflation which is w...

In this paper the e ects on aggregate consumption of changes in the age distribution of the population are analysed empirically. Economic theories predict that age influences individuals’ saving and consumption behaviour. Despite this, age structure e ects are rarely controlled for in empirical consumption functions. Our findings suggest that they...

Forecasting inflation is important in practical monetary policy, and in- creasingly so in countries who have adopted inflation targeting as their oper- ative monetary policy regime. Inflation models are however contested. Rival models are shown to have different forecasting properties over a period that covers a change in regime in the Norwegian ec...

Flere økonomer har lenge etterlyst gode alternativer til eksisterende økonometriske modeller for analyser og prognoser på kort- og mellomlang sikt. Anbefalingen fra Norges Bank Watch 2002 om at Norges Bank burde utvikle en moderne makromodell basert på rasjonelle forventninger ble raskt adoptert i Norges Bank, som startet et modellutviklingsprosjek...

Empirical and theoretical studies suggest that employment behaviour varies with the state of the labour market since hiring and firing costs depend on the availability of labour. Extending earlier empirical work on this subject, we test for state dependence in employment adjustment and in the effects of forcing variables such as indicators of aggre...

Several features of the U.S. natural rate of unemployment are reconsidered through specification and testing of econometric models. Traditionally, the choice has been between a wage Phillips curve model, PCM, or an equilibrium correction wage curve model, WECM. The models proposed in this paper feature extended equilibrium correction which reduces...

The aim of the paper is to check the influence of the degree of forward-lookingness of economic agents on the optimal monetary policy rules, using several versions of a small, highly aggregated structural model describing the transmission mechanism in the spirit of the New Keynesian School. We show the optimal policy rule with the monetary authorit...

The asymptotic distributions of cointegration tests are approximated using the Gamma distribution. The tests considered are for the I(1), the conditional I(1), as well as the I(2) model. Formulae for the parameters of the Gamma distributions are derived from response surfaces. The resulting approximation is flexible, easy to implement and more accu...

Failures are not rare in economic forecasting, probably due to the high incidence of shocks and regime shifts in the economy. Thus, there is a premium on adaptation in the forecast process, in order to avoid sequences of forecast failure. This paper evaluates a sequence of inflation forecasts in the Norges Bank Inflation Report, and we present auto...

Macroeconometric models, in many ways the flagships of the economist's profession in the 1960s, came under increasing attack from both theoretical economist and practitioners in the late 1970s. Critics referred to their lack of microeconomic theoretical foundations, ad hoc models of expectations, lack of identification, neglect of dynamics and non-...

In the course of the 1980s interesting developments took place in macroeconomics. First, the macroeconomic implications of imperfect competition with price-setting firms were developed in several papers and books; see, for example, Bruno (1979), Bruno and Sachs (1984), Blanchard and Kiyotaki (1987), and Blanchard and Fisher (1989: ch. 8). Second, t...

Macroeconometric models, in many ways the flagships of the economist's profession in the 1960s, came under increasing attack from both theoretical economist and practitioners in the late 1970s. Critics referred to their lack of microeconomic theoretical foundations, ad hoc models of expectations, lack of identification, neglect of dynamics and non-...

Macroeconometric models, in many ways the flagships of the economist's profession in the 1960s, came under increasing attack from both theoretical economist and practitioners in the late 1970s. Critics referred to their lack of microeconomic theoretical foundations, ad hoc models of expectations, lack of identification, neglect of dynamics and non-...

The previous four chapters have analysed alternative models of wage–price setting in small open economies. A common underlying assumption has been that all processes are causal or future independent processes, that is, the roots of the characteristic polynomials are on (unit roots) or inside the unit circle. This means that the model can be solved...

The Norwegian model of inflation and the Phillips curve are rooted in the same epoch of macroeconomics. But while Aukrust’s model dwindled away from the academic scene, the Phillips curve literature ‘took off’ in the 1960s and achieved immense impact over the next four decades. Section 4.1.1 records some of the most noteworthy steps in the developm...

Macroeconometric modelling aims at explaining the empirical behaviour of an actual economic system. Such models will be systems of inter-linked equations estimated from time-series data using statistical or econometric techniques. A conceptual starting point is the idea of a general stochastic process that has generated all data we observe for the...

Macroeconometric models, in many ways the flagships of the economist's profession in the 1960s, came under increasing attack from both theoretical economist and practitioners in the late 1970s. Critics referred to their lack of microeconomic theoretical foundations, ad hoc models of expectations, lack of identification, neglect of dynamics and non-...

Macroeconometric models, in many ways the flagships of the economist's profession in the 1960s, came under increasing attack from both theoretical economist and practitioners in the late 1970s. Critics referred to their lack of microeconomic theoretical foundations, ad hoc models of expectations, lack of identification, neglect of dynamics and non-...

The monetarist view of inflation—that inflation is always and everywhere a monetary phenomenon (Friedman 1963, p. 17)—runs contrary to the inflation models we have considered in the preceding chapters. Despite the notable differences that exist between them, they all reflect the view that inflation is best understood as reflecting imbalances in pro...

Macroeconometric models, in many ways the flagships of the economist's profession in the 1960s, came under increasing attack from both theoretical economist and practitioners in the late 1970s. Critics referred to their lack of microeconomic theoretical foundations, ad hoc models of expectations, lack of identification, neglect of dynamics and non-...

Macroeconometric models, in many ways the flagships of the economist's profession in the 1960s, came under increasing attack from both theoretical economist and practitioners in the late 1970s. Critics referred to their lack of microeconomic theoretical foundations, ad hoc models of expectations, lack of identification, neglect of dynamics and non-...

Macroeconometric models, in many ways the flagships of the economist's profession in the 1960s, came under increasing attack from both theoretical economist and practitioners in the late 1970s. Critics referred to their lack of microeconomic theoretical foundations, ad hoc models of expectations, lack of identification, neglect of dynamics and non-...

Taking full account of inflation targeting entails that we supplement our model description of the economy with a monetary rule in terms of an interest rate reaction function for the central bank. The monetary rule can be forecast-based or focused on contemporary values of the target variables in the reaction function. We have chosen to analyse the...

As noted in the introductory chapter, an important development of macroeconometric models has been the representation of the supply side of the economy, and wage–price dynamics in particular. This chapter and the next three (Chapters 4–6) present four frameworks for wage–price modelling, which all have played significant roles in shaping macroecono...

Macroeconometric models, in many ways the flagships of the economist's profession in the 1960s, came under increasing attack from both theoretical economist and practitioners in the late 1970s. Critics referred to their lack of microeconomic theoretical foundations, ad hoc models of expectations, lack of identification, neglect of dynamics and non-...

Macroeconometric models, in many ways the flagships of the economist's profession in the 1960s, came under increasing attack from both theoretical economist and practitioners in the late 1970s. Critics referred to their lack of microeconomic theoretical foundations, ad hoc models of expectations, lack of identification, neglect of dynamics and non-...

The dynamic properties of the The New Keynesian Phillips curve (NPC) is analysed within the framework of a small system of linear difference equations. We evaluate the empirical results of existing studies which uses `Euroland' and US data. The debate has been centered around the goodness-of-fit, but this is a weak criterion since the NPC-fit is ty...

We give an appraisal of the New Keynesian Phillips curve (NPCM) as an empirical model of European inflation. The favourable evidence for NPCMs on euro-area data reported in earlier studies is shown to depend on specific choices made about estimation methodology. The NPCM can be re-interpreted as a highly restricted equilibrium correction model. We...

The dynamic properties of the The New Keynesian Phillips curve (NPC) is analysed within the framework of a small system of linear di.erence equations.We evaluate the empirical results of existing studies which uses ‘Euroland’ and US data. The debate has been centered around the goodness-of-fit, but this is a weak criterion since the NPC-fit is typi...

From a detailed study of the yearly wage bargaining rounds in Norway and Sweden, we construct time series of five complementary coordination indices. Econometrics is used to evaluate the importance of the coordination indicators for our understanding of the changes in the rates of unemployment in the two countries. The results reveal considerable s...

Because they seemed to yield low unemployment, Nordic wage setting mechanisms and labor market policies were, in the 1980s, seen by many as examples to follow. Others ascribed the good performance to conditions on the demand side. Exploiting data also from the 1990s, we take a new look at this debate. Claims that unemployment was low because of hig...

Estimates of the NAIRU are usually derived either from a Phillips curve or from a wage curve. This paper investigates the correspondence between the operational NAIRU concepts and the steady state of a dynamic wage-price model. We derive the parameter restrictions that secure that correspondence. The full set of restrictions can be tested by econom...

After a forecast failure, a respecification is usually necessary to account for the data "ex post", in which case there is a gain in knowledge as a result of the forecast failure. Using Norwegian consumption as an example, we show that the financial deregulation in the mid-1980s led to forecast failure both for consumption functions (CFs) and Euler...

The non-accelerating wage rate of unemployment (NAWRU indicator), used by the OECD as a measure of structural unemployment, has risen for the four Nordic countries Denmark, Finland, Norway and Sweden. In this paper we present stable empirical wage equations for the same countries over the period 1964–1994, in sharp contrast to the increased NAWRU e...

Structural mo dels c arry p ositive c onnotations i n e conomics. Hence prop o-nents of rival theories and modelling strategies compete about priority to label their models as structural. Rhetorics of this type is found in a recent report on monetary policy analysis in Norway, which defines "structural models" as synonymous with systems of equation...

We give an appraisal of the New Keynesian Phillips curve (NPC) as an empirical model of European inflation. We show that existing evidence reported in favour of the NPC on Euro-area and country data is due to a corroborative research strategy. In particular, goodness-of-fit is a weak criterion, since the NPC-fit is well approximated by a random wal...

This paper combines recent developments in methods for solving and estimating rational expectations dynamic models. These developments are applied to a model of labor-market search, where firms operate under uncertainty. We assess the ability of the structural model to mimic nonlinear features found in the data. The solution to the model is obtaine...

Three classes of inflation models are discussed: Standard Phillips curves, New Keynesian Phillips curves and Incomplete Competition models. Their relative merits in explaining and forecasting inflation are investigated theoretically and empirically. We establish that Standard Phillips-curve forecasts are robust to types of structural breaks that ha...

After a forecast failure, a respeci…cation is usually necessary to account for the data ex post, in which case there is a gain in knowledge as a result of the forecast failure. Using Norwegian consumption as an example, we show that the …nancial deregulation in the mid 1980s led to forecast failure both for consumption functions and Euler equations...

Economic theories of imperfectly competitive labour markets predict that wages are linked to profits. In spite of this, profit variables are not explicitly specified in empirical models of wage formation that otherwise are appealing. Does this mean that theory overplays the role of profitability in wage formation? The answer is probably not: Using...

Inflation targeting requires inflation forecasts, yet most models in the literature are either theoretical or calibrated. The motivation for this paper is therefore threefold: We seek to test and implement an econometric model forforecasting inflation in Norway–one economy recently opting for formal inflation targeting rather than a managed nominal...

Recent work by Clements and Hendry elucidate why forecasting systems that are in terms of differences, dVARs, can be more accurate than econometric models that include levels variables, EqCMs. For example, dVAR forecasts are in some cases insulated from parameter non-constancies in the long run mean of the cointegration relationships. In this paper...

The main purpose of this paper is to review and interpret the use of a Monetary Conditions Index (or MCI) by central banks in the conduct of monetary policy. Numerous central banks, governmental organizations, and businesses now cal-culate an MCI as an indicator of the stance of monetary policy. Two central banks, those for Canada and New Zealand,...

In this working paper the regional impacts of road pricing on cars are analysed taking into account externality effects from transportation on wages and productivity. In the paper the direct impacts from changes in transport costs on level of wages and productivity (=direct externality effects) have been estimated. The direct and derived impacts of...

We present a dynamic model of real wages in the open economy that encapsulates the well-known “competing claims model” or “incomplete competition model” of real wage determination. In general, the model determines the development of inflation, real wages and the real exchange rate for any given rate of unemployment. Inflation, rather than unemploym...

Recent work by Clements and Hendry have shown why forecasting systems that are in terms of differences, dVARs, can be more accurate than econometric models that include levels variables, ECMs. For example, dVAR forecasts are insulated from parameter non-constancies in the long run mean of the cointegration relationships. In this paper, the practica...

The paper decomposes GDP both in terms of level per capita and growth rate, so as to identify the sources of income differences and of economic growth for all EU27 member states. This accounting approach has multiple advantages, although a number of substantial caveats should be borne in mind when interpreting the results. In particular, the detail...

. A Monetary Conditions Index has several attractive features.. Its motivation is simple: exchange rates influence. aggregate demand, especially insmall open economies. Thus, focusing on exchange rates as well-as interest rates may be important in un- derstanding an economy's behavior, and so in policymaking. Also, an MCI is easy to calculate. For...

Some recent studies have suggested constructing a Monetary Conditions Index (or MCI) to serve as an indicator of monetary policy stance. The central banks of Canada, Sweden and Norway all construct an MCI and (to varying degrees) use it in conducting monetary policy. Empirically, an MCI is calculated as the weighted sum of changes in a short-term i...

Some recent studies have suggested constructing a Monetary Conditions Index (or MCI) to serve as an indicator of monetary policy stance. The central banks of Canada, Sweden, and Norway all construct an MCI and (to varying degrees) use it in conducting monetary policy. Empirically, an MCI is calculated as the weighted sum of changes in a short-term...

The determinants of Norwegian import prices of manufactures are investigated 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 labor costs. Normalized on import prices, the long-run elasticities are 0.63 (foreign prices...

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 (forei...

This book discusses the nature of exogeneity - a central concept in econometrics - and shows how to test for it through numerous substantive empirical examples. Part I considers what exogeneity is and how it can be tested. Part II contains applications to models of expenditure, money demand, inflation, wages and prices, and exchange rates across bo...

The Norwegian economy is small and open. In 1990, employment in the exposed industries amounted to 70 per cent of total manufacturing employment. Traditionally, export-oriented firms, enjoying Norway’s cost advantage in the production of hydro-electric power, make up a substantial part of the country’s export revenues. The main products of these fi...

We contrast two alternative approaches to the analysis of price behaviour over the business cycle: the "stylized facts" methodology and econometric models. Using the "stylized facts" apparatus on United Kingdom and Norwe- gian data, we find that the relationships between wages and unemployment, are unstable over even short sample periods. We design...

We show that when real-wage flexibility is defined in terms of cointegration of the product real-wage and productivity, the wage formation system in Finnish manufacturing maintains considerable real-wage flexibility. We develop an empirical error- correction model of wages and show that the responsiveness of wages to changes in unemployment is much...

The authors analyze the determinants of Norwegian households' consumption expenditure, using quarterly data for the period 1966(1)-1989(4). Expenditure, income and a broad measure of households wealth appear to form a cointegrating relationship. Likelihood ratio tests do not disprove that the cointegrating vector can be estimated efficiently from a...

This paper presents a model of inflation in a small open economy which features both wage-wage linkages and wage-price spiral. Hence the authors have a simultaneous structure which contains the conventional Scandinavian model of inflation as a special case. Full system estimation results are reported. Great emphasis is placed on data coherency and...