Monetary aspects of Norwegian business cycles: An exploratory study based on historical data

Abstract

Based on the methodology developed by Hodrick and Prescott. this paper shows that monetary activity in Norway does not obey the cyclical patterns described by Lucas in his paper “Understanding business cycles”. By constructing annual time series covering monetary data from 1900 to 1992 it is demonstrated that only credit volume has followed a pro-cyclical pattern. Furthermore, prices are found to be countercyclical during the post-war period. Tests of relative volatility, stability and cyclical skewness are presented, indicating that the business cycle was dampened after World War II.