The Nordic Experience of Financial Liberalization
Edited by Lars Jonoug, Jaakko Kiander and Pentti Vartia
Chapter 10: Twelve Lessons from the Nordic Experience of Financial Liberalization
Lars Jonung INTRODUCTION1 The boom–bust cycle in Finland and Sweden from the mid-1980s till the turn of the century has been examined in the previous chapters. The financial crises of these two countries were compared with the experience of other countries and with major crises of the past. In this final chapter, 12 policy lessons from the Nordic experience of financial liberalization and financial crises are distilled. These lessons may be useful for any country subject to financial tensions in the future. As history demonstrates, financial crises are recurring phenomena; there will be new crises. In addition, the long-run effects of financial integration on the Nordic economies are considered briefly. Now, more than a decade after the end of the depression of the 1990s, the lasting impact of financial liberalization on the Nordic countries may be evaluated. 10.1 THE STYLIZED PATTERN OF THE NORDIC CRISES For a long time, high growth and full employment characterized the macroeconomic record of Denmark, Finland, Norway and Sweden – the Nordic or Scandinavian countries – during the post-World War II period.2 Prior to the 1990s, the Nordic countries were able to avoid the persistent mass unemployment common to many European countries already in the 1970s. Denmark was the only Nordic country experiencing high unemployment in the 1980s. However, the image of the Nordic economies as successful was crushed at the beginning of the 1990s when Finland and Sweden faced a severe crisis and Norway a milder one. The Nordic crises had their roots in the...
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