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OECD Economic Surveys: Norway 2014

image of OECD Economic Surveys: Norway 2014

This 2014 OECD Economic Survey of Norway examines recent economic developements, policies and prospects. Special chapters cover real estate markets and financial risk and entrepreneurship.

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The financial system and real estate: Strengthening resilience

In Norway house prices have risen to high levels, associated with very strong credit growth, in a context of low interest rates. Such a combination was in many countries a contributory factor to the 2008-09 crisis. The Norwegian authorities have been well aware of the problem. Below-target inflation and low interest rates abroad have kept policy interest rates low. Macro-prudential tools have been developed as additional policy instruments with a view to strengthen the banking system’s resilience to possible shocks and dampen systemic risk. This chapter notes that although the authorities seem to have succeeded in containing over-heating pressures in the housing market, high levels of household indebtedness persist, a phenomenon which was an important factor in the last major Norwegian recession. The chapter also provides some longer run considerations on resource allocation in the housing market.

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