| Abstract: |
The Norwegian public sector has net financial assets. The fiscal theory of
price determination applies equally to Norway and economies with net public
debt: If primary surpluses evolve independently of nominal debt (or assets),
the price level has to adjust to satisfy the intertemporal budget constraint
of the public sector. In this ‘non-Ricardian’ regime, monetary policy cannot
provide the nominal anchor. In the alternative ‘Ricardian’ regime, surpluses
respond to debt, and monetary policy is the nominal anchor. The plausibility
of NR regimes is disputed. I use fiscal data and oil prices to argue that the
Norwegian regime is Ricardian. The fiscal theory of price |