How big are multipliers related to public and private oil investments in Norway?

Abstract

In this thesis, we estimate Keynesian investment multipliers related to public and private oil investment in Norway, employing a structural vector autoregressive (SVAR) approach. Our baseline SVAR model is composed of four endogenous variables: Investment in oil, investment net of oil (mainland investment), GDP and the interest rate. We use quarterly data from 1985Q1 to 2021Q4. We assume that oil investment reacts with a lag to the other variables in the system, applying a recursive identification scheme. This is based on the notion that investment in oil tends to be driven by multi-year strategies and is therefore predetermined in relation to the other variables in the system within the quarter. Our resulting multiplier estimates are consistently above one, ranging from 1.24 to 4.43 depending on model specification and the time frame considered. This suggests that GDP increases more than in proportion to an increase in oil investment. Public and private investment in oil do not appear to crowd out private investment. These results are robust to different model specifications.