Green Transition and Macroeconomic Stability in Small Open Economies: A comparative analysis of Denmark and Norway
Translated title
Green Transition and Macroeconomic Stability in Small Open Economies
Author
Nysom, Tore
Term
4. term
Education
Publication year
2026
Submitted on
2026-06-01
Pages
61
Abstract
This thesis explores how the shift to a low-carbon economy may affect macroeconomic stability in small open economies, using Denmark and Norway as comparative cases. It applies a comparative case study guided by economic theory and builds an analytical framework around five dimensions of stability: price stability (inflation), real-economy stability (output and jobs), fiscal stability (public finances), external stability (the economy's position vis-à-vis the rest of the world and the exchange rate), and financial stability (banks and markets). The analysis finds that the green transition can influence stability through connected transmission channels, including energy prices, movement of resources between sectors, public finances, export structure, exchange-rate adjustment, and financial risk. Denmark's transition risks are mostly dispersed and linked to competitiveness, imported cost pressures, infrastructure needs, labour-market adjustment, and policy design under a fixed exchange-rate regime. Norway's risks are more concentrated around petroleum, because oil and gas remain important for exports, public revenues, supplier industries, and the economy's broader external position. These differences are illustrated with a stress-test scenario of a permanent collapse in oil prices. The scenario shows that Norway is affected directly through external, fiscal, and real-economy channels, while Denmark is influenced more indirectly through imported energy costs, incentives for green investment, export demand for low-carbon technologies, and competitiveness. The thesis concludes that macroeconomic outcomes of the low-carbon transition depend not only on the transition itself but also on national starting points that shape how shocks are transmitted, amplified, or dampened. Overall, it highlights that managing stability during the green transition requires identifying the most material transmission channels in each country, rather than assuming a uniform path across small open economies.
Afhandlingen undersøger, hvordan overgangen til en lavemissionsøkonomi påvirker makroøkonomisk stabilitet i små åbne økonomier, med Danmark og Norge som sammenlignende cases. Den anvender et teoriunderstøttet komparativt casestudie og udvikler en analytisk ramme med fem dimensioner af stabilitet: prisstabilitet (inflation), realøkonomisk stabilitet (produktion og beskæftigelse), finanspolitisk stabilitet (offentlige finanser), ekstern stabilitet (økonomiens balance over for udlandet og valutakurs), og finansiel stabilitet (banker og markeder). Analysen viser, at den grønne omstilling påvirker stabilitet gennem forbundne kanaler som energipriser, omfordeling mellem sektorer, offentlige budgetter, eksportstruktur, valutakurstilpasning og finansielle risici. Danmarks risici er hovedsageligt spredte og knytter sig til konkurrenceevne, importeret omkostningspres, behov for infrastruktur, tilpasning på arbejdsmarkedet og udformning af politik under en fastkurspolitik. Norges risici er mere koncentreret omkring petroleum, fordi olie og gas fortsat er vigtige for eksport, offentlige indtægter, leverandørindustrier og økonomiens samlede eksterne position. Forskellene illustreres gennem et stresstest-scenarie med et permanent olieprisfald. Scenariet viser, at Norge rammes direkte via eksterne, finanspolitiske og realøkonomiske kanaler, mens Danmark påvirkes mere indirekte gennem importerede energipriser, incitamenter til grønne investeringer, efterspørgsel efter lavemissionsteknologier og konkurrenceevne. Afhandlingen konkluderer, at de makroøkonomiske konsekvenser af omstillingen afhænger af nationale udgangspunkter, som former hvordan chok overføres, forstærkes eller dæmpes. Overordnet fremhæver den, at stabilitet under den grønne omstilling kræver, at hvert land identificerer de mest betydningsfulde kanaler, frem for at antage en ensartet vej for små åbne økonomier.
[This apstract has been rewritten with the help of AI based on the project's original abstract]