Diagnosing an early symptom of Dutch disease: An empirical analysis of the Norwegian real exchange rate
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This thesis discusses the theoretical aspect of Dutch disease in detail, but focuses on investigation of real appreciation in the Norwegian kroner as a symptom of Dutch Disease. The Behavioral Equilibrium Exchange Rate model (BEER) was applied to analyze the misalignment of the kroner from its expected equilibrium. In this paper, the BEER model takes into account four economic fundamentals relevant to Norway, that being oil price (proxy for Terms of trade), final government consumption, a productivity differential and a trade openness variable. The analysis carried out required the implementation of a Vector Error Correction Model and thereafter a brief application of the Hoderick Prescott Filter. The results obtained indicate that that the Norwegian krone exhibits a trend of being overvalued.
Master's thesis in Economic analysis