Financial Stability 2/2004
2 Macroeconomic developments, households and enterprises
2.1 Developments in the Norwegian economy
2.2 Households
2.3 Enterprises
Boxes:
- Is there a connection between house prices and banking crises?
- Relationship between the results of companies listed on the Oslo Stock Exchange and of the Norwegian enterprise sector as a whole
- How do enterprises hedge against exchange rate fluctuations?
2.1 Developments in the Norwegian economy
Growth in the Norwegian economy is increasing appreciably this year. The low interest rate level, global upturn and high petroleum investment are the primary factors behind this growth. In Inflation Report 3/2004, mainland GDP is projected to continue to rise over the next few years, but at a slower pace (see Table 2.1). Employment is expected to increase by 1.25% in both 2005 and 2006. Labour Force Survey unemployment is projected to decline from 4.5% this year to 3.75% in 2007.
Table 2.1
Norges Bank’s key rate, the sight deposit rate, has remained at 1.75% since March 2004. The level is unusually low and well below what is considered to be normal over time. The krone has appreciated slightly since Financial Stability 1/2004. Inflation in the Norwegian economy is still low.
Private consumption is expanding sharply, fuelled by low interest rates and strong real wage growth. In the first half of 2004, consumption was 5% higher than in the same period last year. The rate of growth in private consumption is projected to fall gradually over the next few years. TNS Gallup’s consumer confidence survey shows that households have a positive view of the future. Consumer confidence with regard to personal finances is now at the highest level since the survey began in 1992 (see Chart 2.1), even though the improvement in the labour market has been limited. Growth in credit to households remains high.
Chart 2.1
The average oil price was USD 37.6 per barrel in the period January-October this year. This is a sharp increase on the average price for 2003, which was USD 28.9 per barrel. The high growth in petroleum investment in 2003 is expected to continue in 2004 and 2005.
Mainland investment fell in 2002 and 2003, but there are now signs of rising investment in a number of industries. In Inflation Report 3/2004, mainland gross capital formation is projected to show an annual rise of 5.75% in 2004. The investment growth is ascribable to improved corporate profitability, rising capacity utilisation and continued export growth. Corporate borrowing has increased and is now showing positive growth. Statistics Norway’s business tendency survey for 2004 Q3 shows that Norwegian industrial leaders generally consider the outlook to be positive (see Chart 2.2). There are, however, considerable differences across industries.
Chart 2.2
All in all, the outlook for the Norwegian economy has improved over the last six months. Expectations of continued relatively low interest rates, lower unemployment and high demand are contributing to optimism among households and enterprises.
2.2 Households
Both debt and assets rising sharply
Household debt is still rising sharply. Debt increased by NOK 124bn between 2003 Q2 and 2004 Q2. Growth in debt is considerably higher than growth in household disposable income. The household debt burden (debt as a percentage of liquid disposable income) is thus increasing and is projected to be about 160% at the end of 2004 Q3. This is a historically high level and high compared with other countries.
Households’ gross financial assets have increased more than debt over the past year (measured in NOK). Financial assets rose by NOK 167bn between 2003 Q2 and 2004 Q2 (see Table 2.2). Of this amount, NOK 33bn is ascribable to valuation changes as a result of the rise in prices for equities and bonds.
Table 2.2
Households’ financial assets are now 35% higher than their debt (see Chart 2.3). In spite of a decline in the past few years, this is appreciably higher than was the case at the end of the 1980s. Housing wealth as a percentage of debt is approximately as high today as it was at that time.
Chart 2.3
Strong growth in housing investment
In addition to investing in financial assets, households can invest in fixed assets, primarily new dwellings. Housing investment has risen sharply in 2004, partly as a result of the rise in resale home prices. In the first eight months of 2004, housing starts were 32% higher than in the same period last year and 20% higher than the average for January-August in the last five years.
Households’ net investments in financial assets (investments in financial assets less new debt in the same period) and net investments in fixed assets together constitute household saving8 (see Chart 2.4). Saving has remained relatively high. A high saving ratio functions as a buffer in that households can choose to reduce saving in order to maintain consumption if they experience a decline in income or are faced with higher interest expenses.
Chart 2.4
In other words, the strong debt growth of recent years has not led to reduced saving, in strong contrast to the situation in the 1980s. Debt growth was also high then, but then debt growth financed consumption and not investment, and overall saving dropped sharply.
Strong pressures in the housing market
House prices have risen markedly over the past year after falling somewhat in the first half of 2003. At end-September 2004, resale home prices were 13% higher than one year earlier. An increase in the supply of new dwellings will in isolation contribute to curbing the rise in prices in the housing market. Pressures in the housing market have been strong. Housing turnover has been high in relation to the number of dwellings for sale. In general, the time it takes to sell a dwelling is shorter this year than was the case in the previous two years.
Over the past 10 years, house prices have risen at a far stronger pace than rental prices (see Chart 2.5). This means that returns on an investment in a dwelling, measured by house rents in relation to house prices, have declined considerably in this period . A lower return on alternative investments has contributed to pushing up demand for dwellings as an investment vehicle and hence to higher house prices. Expectations of lower taxes on dwellings may also have had an impact.
Chart 2.5
Differences in financial reserves across income groups
Assets and debt are unequally distributed among different groups of households. In Financial Stability 1/2004, it was pointed out that low- and middle-income households (deciles 1-6) have increased their debt most in relation to income over the past 10-15 years. However, low- and middle-income households (deciles 1-6) have relatively high financial reserves (gross financial assets in relation to debt) (see Chart 2.6). But these reserves are markedly lower than at the end of the 1980s. As a result of high debt, financial reserves are low in the higher income groups (deciles 7-9). The households with the highest income (decile 10) have increased their reserves considerably since the 1980s.
Chart 2.6
There are considerable differences between employees, the self-employed and people receiving pensions/benefits. The group comprising employees, which accounts for about 60% of households, has lower financial reserves than households as a whole (see Chart 2.7). This applies to all income groups, but low- and middle-income employees (deciles 1-6) in particular have low reserves compared with all households in this income group. This is because a large number of pensioners and some self-employed persons with considerable assets in relation to debt are registered in this income group.
Chart 2.7
Moreover, employees as a group have a higher debt burden (debt as a percentage of disposable income) than households as a whole (see Chart 2.8). Once again, this particularly applies to low- and middle-income employees. The debt burden is also markedly higher in younger age groups than in older age groups (see discussion in Financial Stability 1/2004).
Chart 2.8
With a low income, a high debt burden and low financial reserves, it may quickly become more difficult to service debt. From 2002 to 2003, the number of instituted proceedings under the Debt Settlement Act rose by 22%, from 1640 to 2002. Of these, 481 cases were rejected, while 1521 debt settlement arrangements were approved (both voluntary and compulsory). From 1993, when the Debt Settlement Act entered into force, until the end of 2003, the rates for living expenses under the arrangement increased by close to 60%. The rise in prices in the same period was about 24%. With effect from 1 July 2004, the rates were increased further to an amount equivalent to 85% of the minimum pension. The new rates are nearly twice as high as the central government’s recommended rates for social assistance. The increase in the rates for living expenses under the arrangement, combined with a higher debt burden among those with the lowest income, may have contributed to the increase in new cases under the Debt Settlement Act.
High and rising debt burden, but low interest burden
As a result of the persistently high growth in household debt, the debt burden keeps rising. It is estimated that the debt burden increased by slightly more than 10 percentage points, to just over 160%, from 2003 Q3 to 2004 Q3 (see Chart 2.9).
Chart 2.9
In spite of the strong growth in debt, the household interest burden fell markedly last year (see Chart 2.10). This must be seen in connection with the sharp fall in interest rates through 2003. The share of fixed-interest mortgages in households (mortgages with a fixed rate for more than three months) has remained broadly unchanged, at 15%, from 2004 Q1 to 2004 Q2. The low percentage of fixed-interest mortgages makes households vulnerable to an increase in interest rates.
Chart 2.10
In earlier projections of the debt and interest burden, it was assumed that growth in household debt would slow to the same level as growth in disposable income at the end of the projection period. The projections are now based on the estimated relationships for developments in house prices and household debt that were presented in Financial Stability 1/2004 and Economic Bulletin 3/2004. The projections are otherwise based on the assumptions in the baseline scenario from Inflation Report 3/2004. In this scenario, the interest rate rises from 1.7% at end-2004 to 4.0% at end-2007.
The estimated relationship for house prices indicates that house price inflation will slow to 2.5% in 2007, primarily as a result of higher interest rates. Household debt adapts to house prices with a lag. Annual growth falls from 12% in 2004 to 7% in 2007. Growth in household debt is thus higher than growth in disposable income throughout the projection period. As a result, the household debt burden rises sharply and in 2007 exceeds the level prevailing in the late 1980s (see Chart 2.9).
In the baseline scenario, households’ after-tax borrowing rate will still be at a historically low level at end-2007. This will curb the effect of strong debt growth on the household interest burden. The interest burden falls through 2004 before increasing towards 2007 (see Chart 2.10). At the end of the projection period, the interest burden is approximately the same as in 2001/2002. This is lower than it was at the end of the 1980s.
Uncertain outlook
According to these calculations, the debt burden will in the course of a few years be far higher than it was prior to the banking crisis. Some countries, including Denmark and the Netherlands, currently have a debt burden that is at this level or higher. It is difficult to determine critical values for the debt burden, i.e. levels that are not compatible with financial stability in the long term.
Developments that we have seen over the past few years may be part of households’ structural adjustment to new and improved credit markets with better opportunities for households to spread consumption over a lifetime.
Given the higher debt burden indicated by the projections, households will be more vulnerable to any decline in employment or an increase in interest rates followed by a fall in house prices. However, flexible inflation targeting in monetary policy reduces the risk that households will be exposed to a dual shock in the form of higher unemployment and higher interest rates, as was the case at the beginning of the 1990s.
Is there a connection between house prices and banking crises?
House prices fluctuate widely. Using data from the historical monetary statistics project1, we have examined some features of historical fluctuations dating back to 1819 to see whether there is any connection with the banking crises that have occurred in the period.2 One hypothesis, for example, is that a period with a strong rise in house prices will be characterised by great optimism and strong debt growth. When the optimism declines, house prices may fall, and households may have difficulty in servicing their debt. The value of banks’ collateral will fall, and losses may occur.
In the analysis we have calculated the trend in real house prices with the aid of a Hodrick-Prescott filter based on data up to the individual year.3 The gap between the actual observation and trend is used as the starting point for the analysis (see Chart 1).
Chart 1
In the chart, the banking crises in 1857, 1864, 1880-1890, 1899-1905, 1920-1928 and 1988-1992 are marked grey. The data indicate that the house price gap increased prior to the banking crises. In most cases, it achieved its highest value from one to five years before the banking crisis arose, and was decreasing at the beginning of the banking crisis. The gap has mainly been negative during the banking crises, with the lowest negative peak at or near the end of the crises.
The crisis in 1920-1928 represents an exception. When it was triggered, house prices were well below trend. Developments in house prices had been weak since the previous banking crisis. A high number of housing starts at the end of the 18th century, extensive emigration from Norway in the early 1900s, and hence a large number of empty dwellings may have contributed to this. Moreover, the house price gap changed from negative to positive values during the crisis and reached a maximum when the crisis came to an end. The increase in real house prices is due to the general price level dropping more than nominal house prices during this period. In other words, developments in the house price gap do not always signal the possibility of an imminent banking crisis.
History has shown that it is often particularly when several economic variables at the same time develop more strongly than the historical trend that financial turbulence may arise. It may therefore be useful to use several gap indicators in the analysis.
1) Norges Bank (2004): “Historical Monetary Statistics for Norway 1819-2003”,
Norges Bank Occasional Papers No. 35
2) See Gerdrup, K. (2003): “Three episodes of financial fragility in Norway since the 1890s”,
BIS Working Papers No. 142
3) See Borio, C. And P. Lowe (2002): “Asset prices, financial and monetary stability: exploring the nexus”,
BIS Working Papers No. 114
2.3 Enterprises
Improved profitability
More moderate wage growth, strong productivity growth in a number of industries, low interest rates and increasing demand have improved the profitability of the enterprise sector. The results of listed companies for the third quarter of 2004 show a continued favourable profitability trend in most industries. Expectations of sound results, partly as a result of high oil prices, contributed to a larger rise in equity prices in Norway than abroad in the third quarter (see section 1.4).
The annual reports of limited companies for 20039 confirm that profitability improved from 2002 to 2003. Wider operating margins in key industries such as commercial services and manufacturing contributed to an increase in the operating margin of the enterprise sector as a whole (see Annex Table 2). The operating margin decreased in some industries. Fish-farming was the only industry with a negative operating margin in 2003. Lower interest rates in 2003 resulted in a clear decline in net financial expenses and contributed to a pronounced increase in return on total assets (see Chart 2.11).
Chart 2.11
Although high dividends were again distributed in 2003, higher earnings and low debt growth contributed to a rise in the equity ratio for the enterprise sector as a whole from 2002 to 2003 (Chart 2.11). Equity ratios rose in most industries (see Annex Table 2). Large enterprises generally have a higher equity ratio than small enterprises.
Increased equity financing
Enterprises have borrowed little in recent years, and in periods growth in borrowing has been negative. Bank loans are traditionally the most important source of debt financing, but bank debt has not increased in recent years. Issuance of bonds and short-term paper, which are mainly confined to large Norwegian enterprises, has increased a little in recent years. The share of foreign borrowing has declined somewhat, and accounted for 39 per cent of total credit from domestic and foreign sources at end-August 2004.
Debt items in enterprise balance sheets can be divided into short-term and long-term debt. Since end-2001, enterprises’ short-term debt has declined, while long-term debt has risen somewhat (see Chart 2.12). In addition to traditional debt items such as bank loans and bonds and short-term paper, enterprise sector debt consists of many other types of debt items (see Annex Table 1).
Chart 2.12
Enterprises also finance their activities through equity. Equity consists of paid-in capital resulting from share issues, and earned equity, which is retained earnings. Holdings of paid-in capital have risen sharply since the mid-90s. The decline in holdings of earned equity since the peak at end-1998 must be viewed in the light of low earnings and high dividends. Dividends have been very high for the last three years as a result of expectations that tax on dividends will be introduced. The owners of small enterprises in particular often reinvest received dividends in the enterprise in the form of paid-in capital or by extending loans to the enterprise.
Enterprises invest in fixed assets (real capital), financial assets (financial capital) and intangible assets. The need to raise loans to finance these investments depends on holdings of internal capital (gross assets) and the supply of new internal capital from operations (retained cash surplus). Rising corporate profitability contributed to an increased supply of internal capital in the first half of the 1990s (see Chart 2.13). A high level of investment in 1997 led to corporate debt growth gathering pace again. Since 1997, investment has gradually declined. This decline, coupled with a certain increase in the supply of new internal capital allowed enterprises to reduce their debt financing in 2003.
Chart 2.13
Lower debt and interest burden
Sound profitability and low investments compared with the supply of internal capital have reduced enterprises’ debt burden. The low interest rate level is contributing to pushing down enterprises’ interest burden. If developments in the Norwegian economy are in line with the baseline scenario in Inflation Report 3/2004, the interest and debt burden of the enterprise sector will fall substantially from 2003 to 2004 (see Chart 2.14). The interest burden will increase again in 2006 and 2007, because the rise in interest rates in the baseline scenario will lead to a rise in interest expenses. Higher debt combined with increased interest expenses which pushes down the cash surplus will lead to the debt burden increasing again in 2006 and 2007.
Chart 2.14
We have calculated the debt burden in central industries on the basis of enterprises’ accounting data. For evident reasons, the debt burden in property management is generally very high. This contributes to raising the debt burden of the enterprise sector as a whole. From 2002 to 2003, lower financial costs contributed to a decline in the debt burden in property management (see Chart 2.15). The debt burden in commercial services dropped substantially from 2002 to 2003 as a result of improved profitability.
Chart 2.15
Fewer bankruptcies
The improved corporate profitability has resulted in a marked decline in bankruptcy figures this year. In 2004 Q3 the number of bankruptcies was 21% lower than at the peak in 2003 Q2 (see Chart 4 in the summary). The turnover and number of employees in bankrupt entities show an even sharper decline, of 41% and 33% respectively since 2003 Q4. The turnover of bankrupt enterprises has fallen in all major industries (see Chart 2.16). The decline in 2004 has been largest in manufacturing and in wholesale and retail trade.
Chart 2.16
Lower predicted bankruptcy probabilities
Norges Bank’s bankruptcy prediction model estimates the probability of bankruptcies in non-financial enterprises in the course of the next three accounting years. The predicted bankruptcy probabilities after the 2003 accounting year are a little lower than one year previously. The decline is a little larger for the most exposed enterprises than for the median enterprise (see Chart 2.17).
Chart 2.17
Risk-weighted debt, defined as bankruptcy probability multiplied by bank debt, is a rough estimate of financial institutions’ future losses. Risk-weighted debt as a percentage of bank debt expresses expected loss per krone of debt in the event of bankruptcy and no dividend from the estate in bankruptcy. Lower bankruptcy probabilities contributed to lowering this ratio in several industries from 2002 to 2003 (see Chart 2.18). The improvement was most pronounced in commercial services and property management. However, in fishing and fish-farming risk-weighted debt formed a larger share of bank debt in 2003 than in 2002 (see Annex Table 2).
Chart 2.18
Stabilisation in the commercial property market
The commercial property market is important for banks since well over a third of their lending to the enterprise sector is to property management enterprises (Annex Table 2). Lower interest expenses contributed to improved earnings by property enterprises in 2003 than in 2002, but as a result of high dividends, the equity ratio was not strengthened.
Prices for commercial property have risen over the past year. Lower interest rates have contributed to this increase in prices. From the first half of 2003 to the same period this year, prices for office and commercial property rose by 17% according to figures from Statistics Norway (see Chart 5 in the summary). Their price index is based on registered sales of commercial property.
Of the various sub-markets in the commercial property market, the market for rental of office premises has been weakest. For the past half year, however, there have been signs that rental prices for office premises are stabilising (see Chart 2.19). A reduction in vacant space has contributed to a rise in rental prices in Trondheim. In Bergen the growth in vacant space is levelling off. There is more vacant space in Oslo than in the other large cities, which has led to a further decline in rental prices.
Chart 2.19
Improved earnings and favourable prospects
More moderate wage growth, strong productivity growth, low interest rates and increased economic growth have improved the earnings of much of the enterprise sector. However, some industries still have weak earnings. The financial outlook for the enterprise sector as a whole has improved since half a year ago.
Relationship between the results of companies listed on the Oslo Stock Exchange and of the Norwegian enterprise sector as a whole
Listing on the stock exchange is subject to transparency requirements. Listed companies deliver quarterly reports which provide frequently updated information about the company’s financial developments. This information is not available for other companies. It is therefore interesting to study whether information about the listed companies can be used to estimate developments in the Norwegian enterprise sector as a whole.
At end-2003, 158 Norwegian companies were listed on the Oslo Stock Exchange, while a total of 153 077 limited companies were registered in Norway. In 2003, listed companies1 accounted for about 30% of the total operating income and total assets of all limited companies.
Developments in the results of listed companies may not necessarily be representative for the whole enterprise sector for several reasons:
- Listed companies are larger and more exposed to developments abroad than other companies.2
- The distribution by industry of the Oslo Stock Exchange differs from the distribution in the Norwegian enterprise sector as a whole (see Chart 1). Manufacturing and the oil and gas industry are strongly represented among listed companies. In 2002, Statoil and Norsk Hydro together accounted for 50% of the operating income of the listed companies.
Chart 1
Despite these differences, there has been a relatively close connection, historically, between the profitability trends of listed companies and of limited companies overall. For the past 12 years, trends in the return on equity of listed companies have largely reflected trends in the return on equity of all limited companies (see Chart 2). There is also a close relationship between developments in other key figures, such as net profit margin and operating margin. This can be partly explained by the fact that the various industries are largely influenced by the same economic developments, and that the difference in industrial composition is therefore of less importance.
Chart 2
The return on equity of the listed companies increased from 13% in 2003 to 23% in the first half of 2004. In other words, there is reason to expect a substantial strengthening of the profitability of Norwegian limited companies in 2004.
1) Here “listed company” refers to the entire financial entity, i.e. the group, in those cases where the company delivers consolidated accounts.
2) See the box “How Norwegian is the Oslo Stock Exchange?” in
Financial Stability 1/2004.
How do enterprises hedge against exchange rate fluctuations?
Norges Bank has conducted a survey of currency hedging practice among 128 Norwegian enterprises with currency exposure.1 The selected enterprises have an even distribution among sectors and enterprise sizes. This box presents some of the most important results from the survey.
The majority of the enterprises with currency exposure have a currency strategy that is anchored in the board of directors or the management. This indicates that currency hedging is handled in a well thought-through and systematic manner.
91% of the enterprises state that they use one or more types of currency hedging (see Chart 1). Both foreign currency derivatives and natural hedging techniques are very widely used. One type of natural hedging is to buy input factors in the currency in which the product is invoiced. Another is to raise loans in a currency in which the enterprise has assets. It is common to use several types of currency hedging in parallel. 9% of the enterprises are considering moving some of their operations abroad.2
Chart 1
In the survey, the enterprises were asked to specify what shares of their income and costs are in foreign currency. The difference between income and costs in foreign currency is the enterprise’s net currency exposure3 before any use of foreign currency derivatives. If the enterprise makes extensive use of natural hedging techniques, we can expect foreign currency income and costs to be broadly similar. Chart 2 shows the shares of enterprises with different revenue and cost exposure combinations. Larger circles indicate a larger share of all the enterprises in the survey. The largest group of enterprises has a relatively low share (1-25%) of both income and costs in foreign currency. The net exposure of these enterprises will be limited compared with their total turnover. Net exposure will generally be limited for all enterprises with approximately the same share of income and costs in foreign currency. This is the situation for over a third of the enterprises in the survey.
Chart 2
At the bottom right of the chart are enterprises with a larger share of costs than income in foreign currency (net foreign currency costs). In this category there is a distinct overweight of enterprises that sell consumer goods and enterprises that import capital goods as factor input. Many enterprises have a relatively small share of their costs (1-25%) and no income in foreign currency. For this group, changes in the exchange rate will have a moderate effect on total costs. Few of the enterprises that have no income in foreign currency have a high share of costs in foreign currency. This probably reflects the fact that costs that accrue in Norway, for example wages, rental of premises and distribution costs, account for a substantial share of the overall costs of most of these enterprises.
Most enterprises with high net currency exposure have a higher share of income than costs in foreign currency (net foreign currency income). In this category there is a strong overweight of energy, manufacturing and fishing enterprises. One important reason for this may be that natural hedging techniques are not available to a sufficient extent to these enterprises, because their operations are based on the use of specifically Norwegian raw materials. In general, enterprises with net foreign currency income use foreign currency derivatives more than others (see Chart 3). For these enterprises, the degree of hedging increases with net exposure. Enterprises with net foreign currency costs use derivatives to a lesser extent. One reason for this may be that competition is less intense in the import markets, so that the effect of exchange rate changes can be passed on to customers to a greater extent.
Chart 3
Size is another factor that influences the use of currency hedging. Over 80% of large enterprises4 use foreign currency derivatives, compared with about 40% of small enterprises (see Chart 3). This indicates that economies of scale make it relatively easier for large enterprises to use derivatives. Medium-sized and small enterprises appear to compensate for this by invoicing foreign customers in NOK to a greater extent. Overall, large enterprises nevertheless appear to use a greater variety of currency hedging techniques than small ones.
Foreign currency derivatives are used largely for short-term currency hedging (see Chart 4). 12% of the enterprises that use foreign currency derivatives have contracts with a maturity of over 3 years. 44% of derivative users have contracts with a maturity of 1 - 3 years, but for the majority of these enterprises such contracts account for a small part of their total derivative holdings. This means that the total volume of long-term foreign currency derivatives is limited. There is an overweight of shipping companies and energy sector enterprises among users of long-term derivatives. Short-term contracts with maturities of up to a year are used by the majority, however. For 18% of derivative users, very short-term contracts (with maturities of up to 3 months) account for more than 75% of their total derivative holdings. Among those who place greatest weight on short-term derivatives, there is an overweight of enterprises focused on the consumer segment.
Chart 4
All the enterprises state that the purpose of using foreign currency derivatives is to reduce their currency exposure. At the same time, one of three enterprises states that their hedging practice also enables them to adopt a stance on which direction exchange rates will move, or whether currencies are over- or undervalued. This indicates that some enterprises use currency hedging not just to reduce risk, but also to make gains based on exchange rate movements.
The Norwegian market for foreign currency derivatives to non-financial enterprises has grown strongly in recent years. This trend is discussed in more depth in a box in Chapter 1.
1) Currency exposure means that a share of income, costs, assets or debt is in a currency other than NOK.
2) Factors other than currency hedging, such as the Norwegian labour cost level, or a desire for proximity to the market, are also important when an enterprise considers relocating.
3) Provided that foreign currency income and costs are in the same currency. Net exposure will also be approximately the same for two highly correlated currencies.
4) Large enterprises are defined here as enterprises with turnover of over NOK 500m. Small enterprises are enterprises with turnover of less than NOK 150m. There are approximately equal numbers of small, medium-sized and large enterprises in the selection.
8) We have used figures on net investments in financial assets from financial accounts from Norges Bank and not Statistics Norway’s national accounts figures. The sum of net investments in financial assets and net investments in fixed assets will therefore deviate somewhat from household saving as defined in the national accounts.
9) When the annual accounts figures are delivered to Norges Bank in September of the year following the accounting year, accounts for between 5 and 10 per cent of the enterprises are normally not (yet) available. Enterprises that are late in their deliveries of annual accounts normally have lower profitability than others, and will tend to weaken the accounting ratios.