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Finnish monetary and foreign exchange policy and the changeover to the euro

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  • Korhonen, Tapio

Abstract

This paper presents the salient aspects of Finland's monetary and exchange rate policies during the run-up to monetary union in the 1990s.In the course of slightly more than a decade, Finland's monetary and exchange rate policies were thoroughly revamped.The remnants of heavy regulation were removed and a market-based financial system was put in place.There were serious problems associated with the liberalisation process in the early part of the decade, the most noteworthy being an economic and banking crisis. Finland's financial system nonetheless developed rapidly and became a more integrated part of the global system.As regards exchange rate policy, almost all varieties of exchange rate regime were tried.A fixed rate regime based on a currency index fell apart in the early part of the decade and was replaced by a floating rate system.Later, in 1993, this was combined with an inflation-targeting monetary policy strategy.At the start of 1995 Finland joined the European Union, and in October 1996 the markka was joined to the EU's Exchange Rate Mechanism.The improvement in financial and price stability that followed the economic crisis facilitated the adjustment to the euro area's single currency and single monetary policy at the start of 1999, which was accomplished without serious problems.Key words: monetary policy, foreign exchange policy, EMU, euro, monetary policy arrangements

Suggested Citation

  • Korhonen, Tapio, 2001. "Finnish monetary and foreign exchange policy and the changeover to the euro," Research Discussion Papers 25/2001, Bank of Finland.
  • Handle: RePEc:bof:bofrdp:2001_025
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    References listed on IDEAS

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    Cited by:

    1. Beata Farkas, 2011. "The Central and Eastern European model of capitalism," Post-Communist Economies, Taylor & Francis Journals, vol. 23(1), pages 15-34.
    2. Lauri Lättilä & Olli-Pekka Hilmola, 2012. "Forecasting long-term demand of largest Finnish sea ports," International Journal of Applied Management Science, Inderscience Enterprises Ltd, vol. 4(1), pages 52-79.

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