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Depression in the north - boom and bust in Sweden and Finland, 1985-93

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  • Lars Jonung

    (Stockholm School of Economics)

  • Hans Tson Söderström

    (SNS - Center for Business and Policy Studies and Stockholm School of Economics)

  • Joakim Stymne

    (Alfred Berg Fondkommission AB and Stockholm School of Economics)

Abstract

A comparison of the boom-and-bust cycle of Sweden and Finland during 198593 reveals remarkable similarities. We examine macroeconomic developments during the period with a special emphasis on asset market developments. The seeds of the crisis were »traditional» Nordic problems combined with the consequences of late deregulation of financial markets. We identify five factors that were present in both countries and that account for the depth of the downturn: an »ordinaly» cyclical downturn, a real interest rate shock, asset price deflation with balance sheet consolidation, financial fragility and slow structural adjustment. Differences in policy response are analyzed.

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Bibliographic Info

Article provided by Finnish Economic Association in its journal Finnish Economic Papers.

Volume (Year): 9 (1996)
Issue (Month): 1 (Spring)
Pages: 55-71

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Handle: RePEc:fep:journl:v:9:y:1996:i:1:p:55-71

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Web page: http://www.taloustieteellinenyhdistys.fi
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  1. Mishkin, F.S., 1988. "What Does The Term Structure Tell Us About Future Inflation?," Papers fb-_88-29, Columbia - Graduate School of Business.
  2. Ben S. Bernanke & Alan S. Blinder, 1988. "Credit, Money, and Aggregate Demand," NBER Working Papers 2534, National Bureau of Economic Research, Inc.
  3. Steigum, E.Jr., 1992. "Financial Deregulation, Credit Boom and Banking Crisis: The Case of Norway," Papers 15-92, Norwegian School of Economics and Business Administration-.
  4. Kaufman, Roger T., 1988. "An international comparison of Okun's laws," Journal of Comparative Economics, Elsevier, vol. 12(2), pages 182-203, June.
  5. Giancarlo Corsetti & Nouriel Roubini, 1996. "Budget deficits, public sector solvency and political biases in fiscal policy : a case study of Finland," Finnish Economic Papers, Finnish Economic Association, vol. 9(1), pages 18-36, Spring.
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Cited by:
  1. Lars Jonung & Ludger Schuknecht & Mika Tujula, 2005. "The boom-bust cycle in Finland and Sweden 1984-1995 in an international perspective," European Economy - Economic Papers 237, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  2. Lars Jonung & Jaakko Kiander & Pentti Vartia, 2008. "The great financial crisis in Finland and Sweden - The dynamics of boom, bust and recovery, 1985-2000," European Economy - Economic Papers 350, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  3. Evridiki Tsounta, 2011. "Home Sweet Home," IMF Working Papers 11/191, International Monetary Fund.
  4. Jaakko Kiander & Pentti Vartia, 2011. "Lessons from the crisis in Finland and Sweden in the 1990s," Empirica, Springer, vol. 38(1), pages 53-69, February.

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