Carbon taxes and Macroeconomic dynamics in Norway

Anienwe, Prince and Bhattarai, Keshab (2026): Carbon taxes and Macroeconomic dynamics in Norway.

Abstract

This study investigates the long-term equilibrium relationships between Norway's carbon tax policy and key macroeconomic indicators using Johansen cointegration analysis and the Vector Error Correction Model (VECM). The findings show that Norway's carbon tax raises inflation and lowers investment over time, but does not impact GDP. These findings, based on cointegration and VECM analysis of carbon tax, GDP, investment, and inflation from 1995 to 2023, enhance understanding of how carbon taxes affect Norway's macroeconomy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Carbon Tax, Cointegration, Vector Error Correction Model, GDP, Inflation, Investment.
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate ; Natural Disasters and Their Management ; Global Warming; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy

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