How did the inflation targeting policy of Norges Bank impact the 2008 financial crisis?

Abstract

The present thesis analyzes the impact of the Norwegian inflation targeting regime on the 2008 financial crisis. A series of macroeconomic indicators are used to evaluate the usefulness of inflation as a proxy for economic activity. I find that a combination of rapidly increasing prices in housing and stock markets, combined with increasing export prices and declining import prices have led to an exceptionally large gap between pressure in the economy and the inflation rate. Consequently, the central bank ought to have pursued a tighter monetary policy, to limit vulnerability to new shocks.