Norges Bank Structural Model
Without this organization, probably policies would have not been enough to resolve the financial difficulties. The Fund is operating through the Norges Bank as an investment bank that enables Norway to generate high level of income independent from non-renawable sources. According to Jafarov, et al (2007), The Fund was established as a tool to support prudent management of Norway’s petroleum wealth. One purpose is to shield the non-oil economy from price fluctuations. The Fund is also a long-term savings instrument. It will help to cope with future financial commitments linked to an ageing population. Accumulation of capital in the Fund reflects the depletion of a non-renewable resource, which is exchanged for financial assets through the Fund’s investments. By setting up the Fund, it became possible to establish a path for production of oil and gas that is independent of the profile for petroleum revenue spending. Norges Bank manages the fund on behalf of the Ministry of Finance. In 1998, the Bank established a separate investment management unit, Norges Bank Investment Management (NBIM), which manages the fund. The alternative to a fund would have been to directly regulate production by putting a conservative upper limit on annual extraction.