Counting the Oil Money and the Elderly: Norway's Public Sector Balance Sheet

August 27, 2018

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Ezequiel Cabezon, and Christian Henn. Counting the Oil Money and the Elderly: Norway's Public Sector Balance Sheet, (USA: International Monetary Fund, 2018) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Based on a permanent income analysis, Gagnon (2018) has prominently suggested that Norway has saved too much, thereby free-riding on the rest of the world for demand. Our public sector balance sheet analysis comes to the opposite conclusion, chiefly because it also accounts for future aging costs. Unsurprisingly, we find that Norway’s current assets exceed its liabilities by some 340 percent of mainland GDP. But its nonoil fiscal deficits have grown very large (to almost 8 percent of mainland GDP) and aging pressures are only commencing. Therefore, Norway’s intertemporal financial net worth (IFNW) is negative, at about -240 percent of mainland GDP. As IFNW represents an intertemporal budget constraint, this implies that Norway’s savings are likely insufficient to address aging costs without additional fiscal action.

Subject: Aging, Asset prices, Financial statements, Fiscal policy, Oil prices, Population and demographics, Prices, Public financial management (PFM), Public sector

Keywords: Aging, Asset price, Asset prices, Asset stock, Debt Sustainability, Financial statements, Global, GPFG asset, GPFG consist, Intertemporal Fiscal Balances, Intertemporal public sector balance sheet, Mainland GDP, Nonfinancial assets, Norway, Norway's assets, Norway's IFNW, Norway's intertemporal financial net worth, Norwegian krone, Oil price, Oil prices, Price development, Public Sector Balance Sheet, Statistics Norway, WP

Publication Details

Pages:

55
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/190
Stock No:

WPIEA2018190
ISBN:

9781484370117
ISSN:

1018-5941

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