| dc.description.abstract | In this master’s thesis, we have analyzed how dependent the Norwegian economy has
become
on the oil fund and its sensitivity to the size of its withdrawals. The government uses
withdrawals to cover the yearly oil-adjusted budget deficits, and their size is governed by the
monetary action rule.
The rule has been a guideline for the rate of integration of petroleum revenues into the
economy. To analyze the dependency, we modeled how a 50 percent stock market crash
would affect the share portion of the oil fund. We also looked at the impact on the fund of a
significant de/appreciation of the Norwegian currency. We saw how these scenarios would
affect the available funds to cover yearly budget deficits.
Analysis part one shows that the current monetary action rule has become outdated. One of
the main reasons is the increased size of the withdrawals compared to the percentage of the
state’s total budgetary expenses. The fund’s growth in value has resulted in the economy
becoming too dependent on withdrawals since they show an increasing trend. The integration
rate of petroleum revenues into the economy is not sustainable in the long run.
Analysis part two involves our different, viable solutions to the problem proved in the first
part. The solutions we discuss are the cash flow method, the GDP method, lowering the
current monetary action rule to 2 percent, and covering deficits by issuing debt. We have
concluded that they could be a better solution to the current monetary action rule. | en_US |
