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Norges Bank has been an integrated part of Norwegian economic development since the complicated birth of the new nation-state after the Napoleonic wars. This text traces its 200-year history, focusing on its relations with political institutions that have shaped and reshaped the bank's role since its establishment in 1816.

AbstractWar is expensive—troops must be equipped and weapons must be procured. When the enormous borrowing requirements of war make the sovereigns' credibility problem more difficult, central banks enhance a government's ability to borrow. By being the sole direct purchaser of government debt, the central bank increases the effective punishment that can be imposed on the government for defaulting on the marginal lender. This increases lenders' confidence that the government will be punished in case of default, making lenders willing to purchase the debt at a lower rate of interest. The sovereign, dependent on the low borrowing costs offered by the central bank, has an incentive to retain the bank. Data covering the nineteenth and early twentieth centuries reveal that possessing a central bank lowers the sovereign's borrowing costs, particularly during times of war.

All the first central banks were established in the form of private joint-stock companies. After World War II the majority of them were nationalized. However the small group of central banks continues to remain in private property. Though their financial activities do not differ from other central banks, private property has an essential influence on corporate governance.

The ability to finance conflict likely affects the odds of sustaining a war and succeeding in it. Recent literature explores rebel group funding, but far less is known about how states finance their own war efforts. This article posits that the design of central banks should affect civil war termination. In particular, it argues that central bank independence affects civil war termination through two channels. First, financial markets consider central bank independence as a good signal in terms of macroeconomic stability and debt repayment. In this way, independent central banks enhance the ability of the government to access credit to finance and end a civil war. Second, central bank independence is associated with lower inflation. Inflation control reduces one source of additional grievances that the civil war may impose on citizens. On a sample of civil wars between 1975 and 2009, central bank independence is associated with a substantial increase in the likelihood of war termination. When the form of termination is disaggregated, (higher) central bank independence is associated with a higher probability of government victory, relative to continued conflict and to other outcomes. Additional tests provide support for the argued mechanisms: during civil wars, countries with more independent central banks access international credit markets in better conditions – i.e. they pay lower interest rates, and receive longer grace and maturity periods on new debt. Furthermore, in countries experiencing civil wars, central bank independence is associated with lower inflation.

The ability to finance conflict likely affects the odds of sustaining a war and succeeding in it. Recent literature explores rebel group funding, but far less is known about how states finance their own war efforts. This article posits that the design of central banks should affect civil war termination. In particular, it argues that central bank independence affects civil war termination through two channels. First, financial markets consider central bank independence as a good signal in terms of macroeconomic stability and debt repayment. In this way, independent central banks enhance the ability of the government to access credit to finance and end a civil war. Second, central bank independence is associated with lower inflation. Inflation control reduces one source of additional grievances that the civil war may impose on citizens. On a sample of civil wars between 1975 and 2009, central bank independence is associated with a substantial increase in the likelihood of war termination. When the form of termination is disaggregated, (higher) central bank independence is associated with a higher probability of government victory, relative to continued conflict and to other outcomes. Additional tests provide support for the argued mechanisms: during civil wars, countries with more independent central banks access international credit markets in better conditions – i.e. they pay lower interest rates, and receive longer grace and maturity periods on new debt. Furthermore, in countries experiencing civil wars, central bank independence is associated with lower inflation.

The ability to finance conflict likely affects the odds of sustaining a war and succeeding in it. Recent literature explores rebel group funding, but far less is known about how states finance their own war efforts. This paper posits that the design of central banks should affect civil war termination. In particular, it argues that central bank independence (CBI) affects civil war termination through two channels. First, financial markets consider CBI as a good signal in terms of macroeconomic stability and debt repayment. In this way, independent central banks enhance the ability of the government to access credit to finance and end a civil war. Second, CBI is associated with lower inflation. Inflation control reduces one source of additional grievances that the civil war may impose on citizens. On a sample of civil wars between 1975 and 2009, CBI is associated with a substantial increase in the likelihood of war termination. When the form of termination is disaggregated, (higher) CBI is associated with a higher probability of government victory, relative to continued conflict and to other outcomes. Additional tests provide support for the argued mechanisms: during civil wars, countries with more independent central banks access international credit markets in better conditions – i.e., they pay lower interest rates, and receive longer grace and maturity periods on new debt. Furthermore, in countries experiencing civil wars, central bank independence is associated with lower inflation.