The boom-bust cycle in Finland and Sweden 1984-1995 in an international perspective

Lars Jonung (), Ludger Schuknecht and Mika Tujula

No 2006/13, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: This paper compares the boom-bust cycle in Finland and Sweden 1984-1995 with the average boom-bust pattern in industrialized countries as calculated from an international sample for the period 1970-2002. Two clear conclusions emerge. First, the Finnish-Swedish experience is much more volatile than the average boom-bust pattern. This holds for virtually every time series examined. Second, the bust and the recovery in the two Nordic countries differ markedly more from the international pattern than the boom phase does. The bust is considerably deeper and the recovery comes earlier and is more rapid. We explain the highly volatile character of the Finnish and Swedish boom-bust episode by the design of economic policies in the 1980s and 1990s. The boom-bust cycle in Finland and Sweden 1984-1995 was driven by financial liberalization and a hard currency policy, causing large pro-cyclical swings in the real rate of interest transmitted via the financial sector into the real sector and then into the public finances.

Keywords: Boom; Bust; Asset Price Cycles; Real Interest Rates; Financial Crisis; Finland; Sweden (search for similar items in EconPapers)
JEL-codes: E32 E62 E63 (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: The boom-bust cycle in Finland and Sweden 1984-1995 in an international perspective (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:200613

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