Annika Alexius on Norway’s weak currency
The Norwegian krone has weakened significantly over the past ten years. Annika Alexius, a professor of economics at Stockholm University, gives an explanation of why in Dagens Nyheter.
Three reasons for the declining krone
In Dagens Nyheter, Annika Alexius discusses the declining Norwegian krone. According to her, currency movements are often difficult to explain and are influenced by multiple factors. Regarding the Norwegian krone, she identifies two main reasons for its weak performance.
Firstly, the price of oil, a key component of Norway’s economy, has had a negative impact. Secondly, the country’s economy is not performing as strongly as before. Productivity has declined, wages have risen significantly, and inflation remains high. Despite this, Norway's central bank has maintained a high interest rate of 4.5 percent, which is necessary as inflation remains at 2.5 percent – above the target.
Every time there is a lot of uncertainty in the world, investors seek to avoid risk
A third factor is that smaller currencies like the Norwegian and Swedish, tend to weaken during global crises. In recent years, the pandemic and the war in Ukraine have created significant uncertainty, leading investors to steer clear of smaller currencies to reduce risk.
”Every time there is a lot of uncertainty in the world, investors seek to avoid risk. This leads them to avoid small currencies”, Annika Alexius explains in the interview.
Find out more
Read the full article in Dagens Nyheter, 23 November 2024 (in Swedish)
Annika Alexius is a professor of economics at Stockholm University. Her research focuses on empirical macro, monetary policy, and international finance.
Last updated: November 25, 2024
Source: Department of Economics