Employee Profile

Gisle James Natvik

Professor

Department of Economics

Room number B3Y-096
Phone +4746410677
E-mail gisle.j.natvik@bi.no

Biography

Gisle J. Natvik is a professor of economics at the Norwegian Business School (BI). His main research interests are within macro economics, monetary economics and political economy.

Natvik's work has been published in European Economic Review, International Economic Review, Journal of the European Economic Association, Journal of Money, Credit and Banking, Journal of Public Economics, and other journals.

For further information, please see my personal homepage.

Area of Expertise

Applied economics
Financial Crisis
The Budgetary Rule
Macroeconomics
Monetary policy
Political Economy
Covid-19
Interest Rates
The National Budget

Publications

Shows 5 of 21 publication(s)

Article Andreas Fagereng, Matthieu Gomez, Emilien Gouin-Bonenfant, Martin Blomhoff Holm, Benjamin Moll, Gisle James Natvik (2025)

Asset-Price Redistribution

Journal of Political Economy 133(11) p. 3494-3549 Doi: https://doi.org/10.1086/736769

Asset valuations across many asset classes have increased substantially over the last several decades. While these rising valuations had important effects on the distribution of wealth, little is known regarding their redistributive effects in terms of welfare. To make progress on this question, we develop a sufficient statistic for the money-metric welfare gain of deviations in asset valuations. This welfare gain depends on the present value of an individual’s net asset sales rather than asset holdings: higher asset valuations benefit prospective sellers and harm prospective buyers. We estimate this quantity using panel microdata covering the universe of financial transactions in Norway from 1994 to 2019. We further demonstrate how to adapt our baseline statistic to account for important considerations, such as incomplete markets and collateral constraints. We find that the rise in asset valuations had large redistributive effects: it redistributed from the young to the old and from the poor to the wealthy.

Article Halvor Mehlum, Gisle James Natvik, Ragnar Torvik (2024)

The impossible trinity: Competitive markets, free entry, and efficiency

Journal of Public Economics 239 p. 1-12 Doi: https://doi.org/10.1016/j.jpubeco.2024.105240

We present a model in which workers make occupational choices and vote over a tax rate which determines the level of government spending. Workers in occupations whose services are in high (low) demand by the government favor high (low) taxes. We show that the socially efficient size of the public sector cannot be supported in a political economic equilibrium. The reason is that equilibrium tax rates always reward excessive entry into the politically most powerful sector, and thus the equilibrium size of government is always either too big or too small. We show that this is an example of a more general political economy result that extends well beyond the baseline model and holds quite generally: the combination of (i) competitive markets and (ii) free entry is inconsistent with (iii) allocative efficiency.

Article Andreas Fagereng, Martin Blomhoff Holm, Gisle James Natvik (2021)

MPC Heterogeneity and Household Balance Sheets

American Economic Journal: Macroeconomics 13(4) p. 1-54 Doi: https://doi.org/10.1257/mac.20190211

We use sizable lottery prizes in Norwegian administrative panel data to explore how transitory income shocks are spent and saved over time, and how households’ marginal propensities to consume (MPCs) vary with household characteristics and shock size. We find that spending peaks in the year of winning and gradually reverts to normal within five years. Controlling for all items on households’ balance sheets and characteristics such as education and income, it is the amount won, age, and liquid assets that vary systematically with MPCs. Low-liquidity winners of the smallest prizes (around USD 1,500) are estimated to spend all within the year of winning. The corresponding estimate for high-liquidity winners of large prizes (USD 8,300-150,000) is slightly below one half. While conventional models will struggle to account for such high MPC levels, we show that a two-asset life-cycle model with a realistic earnings profile and a luxury bequest motive can account for both the time profile of consumption responses and their systematic co-variation with observables.

Article Gisle James Natvik, Christian Grisse (2020)

Sovereign debt crises and cross-country assistance

Oxford Economic Papers 74(1) p. 178-193 Doi: https://doi.org/10.1093/oep/gpaa019

We provide a parsimonious framework to study the interplay between cross-country assistance and expectations-driven sovereign debt crises. Our framework extends the traditional single-country model of how multiple perfect-foresight equilibria are possible when a sovereign attempts to service public debt. The extension is that a self-interested ‘safe’ country may choose to assist a ‘risky’ country which is prone to default. Investors internalize the potential for assistance when lending to fragile countries. If the safe country cannot commit to fixed cross-country transfers or rule them out completely, assistance improves equilibrium outcomes only if the risky country is fundamentally insolvent in the sense that it cannot repay existing debt at the risk-free interest rate. If a default requires pessimistic expectations, an incentive-compatible (IC) assistance policy has adverse side effects.

Article Magnus Andreas Haare Gulbrandsen, Gisle James Natvik (2020)

Monetary Policy and Household Debt

Nordic Economic Policy Review p. 67-99 Doi: https://doi.org/10.6027/Nord2020-025

We address the interplay between household debt accumulation and monetary policy. Monetary policy likely affects household debt-to-income ratios via disposable income and inflation, not just by changing the financial incentive to save. We provide micro-level snapshots from Norway on how households’ income flows and debt accumulation co-move with interest rates and inflation. Real interest rate hikes are associated with increased real debt due to strong negative association between inflation and real debt. We therefore caution against pursuing contractionary policies to curb household debt. By lowering inflation, such policies might backfire and increase household debt burdens.

Editorial Gisle James Natvik (2020)

Krisetiltakene må endres slik at de fremmer verdiskaping

Dagens næringsliv

Article Gisle James Natvik, Dagfinn Rime, Olav Syrstad (2020)

Does publication of interest rate paths provide guidance?

Journal of International Money and Finance Doi: https://doi.org/10.1016/j.jimonfin.2019.102123

Article Gisle James Natvik, Dagfinn Rime, Olav Syrstad (2020)

Does publication of interest rate paths provide guidance?

Journal of International Money and Finance 103(May) p. 1-22 Doi: https://doi.org/10.1016/j.jimonfin.2019.102123

Does the central bank practice of publishing interest rate projections (IRPs) improve how market participants map new information into future interest rates? Using high-frequency data on forward rate agreements (FRAs) we compute market forecast errors; differences between expected future interest rates and ex-post realizations. We assess their change in narrow windows around monetary policy announcements and macroeconomic releases in Norway and Sweden. Overall, communication of future policy plans does not improve markets’ response to information, irrespective of whether or not IRPs are in place. A decomposition of market reactions into responses to the current monetary policy action (“target”) and responses to signals about the future (“path”), reveals that only policy actions lead to improvements in market forecasts.

Editorial Gisle James Natvik (2020)

Inflasjon og gjeld

Dagens næringsliv

Editorial Gisle James Natvik (2020)

Veien tilbake til tre prosent

Dagens næringsliv

Article Massimiliano Caporin, Gisle James Natvik, Francesco Ravazzolo, Paolo Santucci de Magistris (2019)

The bank-sovereign nexus: Evidence from a non-bailout episode

Journal of Empirical Finance 53(September) p. 181-196 Doi: https://doi.org/10.1016/j.jempfin.2019.07.001

We explore the interplay between sovereign and bank credit risk in a setting where Danish authorities first let two Danish banks default and then left the country’s largest bank, Danske Bank, to recapitalize privately. We find that the correlation between bank and sovereign credit default swap (CDS) rates changed with these events. Following the non-bailout events, the sensitivity to external shocks, proxied by CDS rates on the European banking sector, declined both for Danske Bank and for Danish sovereign debt. After Danske Bank’s recapitalization, its exposure to the European banking sector reappeared while that did not happen for Danish sovereign debt. The decoupling between CDS rates on sovereign and private bank debt indicates that the vicious feedback loop between bank and sovereign risk weakened after the non-bailout policies were introduced.

Article Steinar Holden, Gisle James Natvik, Adrien Henri Vigier (2018)

CREDIT RATING AND DEBT CRISES

International Economic Review 59(2) p. 973-987 Doi: https://doi.org/10.1111/iere.12293

We develop an equilibrium theory of credit rating in the presence of rollover risk. By influencing rational creditors, ratings affect sovereigns' probability of default, which in turn affects ratings. Our analysis reveals a pro‐cyclical impact of credit rating: In equilibrium the presence of a rating agency increases default risk when it is high and decreases default risk when it is low.

Article Paolo Gelain, Kevin Lansing, Gisle James Natvik (2018)

Leaning Against The Credit Cycle

Journal of the European Economic Association 16(5) p. 1350-1393 Doi: https://doi.org/10.1093/jeea/jvx043

How should a central bank act to stabilize the ratio of debt over gross domestic product (GDP)? We show how the persistent nature of household debt shapes the answer to this question. In environments where households repay mortgages gradually, surprise interest hikes only weakly influence household debt, and tend to increase debt-to-GDP in the short run while reducing it in the medium run. Interest rate rules with a positive weight on debt-to-GDP cause indeterminacy. Compared to inflation targeting, debt-to-GDP stabilization calls for a more expansionary policy when debt-to-GDP is high, so as to deflate the debt burden through inflation and output growth.

Article Paolo Gelain, Kevin Lansing, Gisle James Natvik (2018)

Explaining the Boom-Bust Cycle in the U.S. Housing Market: A Reverse-Engineering Approach

Journal of Money, Credit and Banking 50(8) p. 1751-1783 Doi: https://doi.org/10.1111/jmcb.12504

We use a quantitative asset pricing model to “reverse‐engineer” the sequences of shocks to housing demand and lending standards needed to replicate the boom–bust patterns in U.S. housing value and mortgage debt from 1993 to 2015. Conditional on the observed paths for U.S. real consumption growth, the real mortgage interest rate, and the supply of residential fixed assets, a specification with random walk expectations outperforms one with rational expectations in plausibly matching the patterns in the data. Counterfactual simulations show that shocks to housing demand, housing supply, and lending standards were important, but movements in the mortgage interest rate were not.

Article Knut Are Aastveit, Gisle James Natvik, Sergio Sola (2017)

Economic uncertainty and the influence of monetary policy

Journal of International Money and Finance 76 p. 50-67 Doi: https://doi.org/10.1016/j.jimonfin.2017.05.003

This paper explores if economic uncertainty alters the macroeconomic influence of monetary policy. We use several measures of U.S. economic uncertainty, and estimate their interaction with monetary policy shocks as identified through structural vector autoregressions. We find that U.S. monetary policy shocks affect economic activity less when uncertainty is high, in line with “real-option” effects from theory. Holding uncertainty constant, the effect on investment is approximately halved when uncertainty is in its top instead of its bottom decile.

Article Egil Matsen, Gisle James Natvik, Ragnar Torvik (2016)

Petro populism

Journal of Development Economics 118 p. 1-12 Doi: https://doi.org/10.1016/j.jdeveco.2015.08.010

We aim to explain petro populism|the excessive use of oil revenues to buy political support. To reap the full gains of natural resource income, politicians need to remain in o ce over time. Hence, even a rent-seeking incumbent who prioritizes his own welfare above that of citizens, will want to provide voters with goods and services if it promotes his probability of remaining in o ce. While this incentive bene ts citizens under the rule of rent-seekers, it adversely motivates benevolent policymakers to short-term overprovision of goods and services. In equilibrium, politicians of all types indulge in excessive resource extraction, while voters reward policies they realize cannot be sustained over time. Moreover, overextraction might even be reinforced as voters become better informed.

Article Gisle James Natvik, Nikola Mirkov (2016)

Announcements of interest rate forecasts: Do policymakers stick to them?

Journal of Money, Credit and Banking 48(5) p. 901-920 Doi: https://doi.org/10.1111/jmcb.12321

If central banks value the ex post accuracy of their published forecasts, previously announced interest rate paths might influence the current policy rate. We explore if “forecast adherence” has affected monetary policy in New Zealand and Norway, where central banks have published their interest rate forecasts the longest. We derive and estimate policy rules with separate weights on past interest rate forecasts and find that they have explanatory power for current policy decisions, over and above their correlation with other conventional interest rate rule arguments.

Article Gisle James Natvik (2013)

The Political Economy of Fiscal Deficits and Government Production

European Economic Review 58 p. 81-94 Doi: https://doi.org/10.1016/j.euroecorev.2012.12.001

Article Gisle James Natvik, Francesco Furlanetto, Martin Seneca (2013)

Investment shocks and macroeconomic co-movement

Journal of macroeconomics 37 p. 208-216 Doi: https://doi.org/10.1016/j.jmacro.2013.03.005

Article Gisle James Natvik (2012)

Government Spending Shocks and Rule-of-Thumb Consumers with Steady State Inequality

The Scandinavian Journal of Economics 114 p. 1414-1436 Doi: https://doi.org/10.1111/j.1467-9442.2012.01727.x

Article Gisle James Natvik (2009)

Government Spending and the Taylor Principle

Journal of Money, Credit and Banking 41(1) p. 57-77

Shows 5 of 25 publication(s)

Feature article Martin B. Holm, Gisle James Natvik, Karin Kinnerud, Kjetil Storesletten (2024)

På høy tid å justere avdragskravet

Feature article Gisle James Natvik (2024)

Arbeiderpartiets tapte mulighet

Feature article Gisle James Natvik (2024)

For sløve om skatters kostnader?

Feature article Gisle James Natvik (2024)

Et bredt skatteforlik nå, vær så snill

Feature article Ella Getz Wold, Gisle James Natvik (2024)

Ulikhet går i arv via boligmarkedet

Feature article Gisle James Natvik (2024)

Knapphet i økonomiundervisningen

Feature article Gisle James Natvik (2024)