Catching-up Strategies in CESEE Economies
Edited by Ewald Nowotny, Peter Mooslechner and Doris Ritzberger-Grünwald
Chapter 3: Re-establishing Growth After the Crisis – Lessons from the Nordic Countries
3. Re-establishing growth after the crisis – lessons from the Nordic countries Seppo Honkapohja1 INTRODUCTION 1 The financial crisis that started in 2008 led to a very big recession and also seems to have longer-term consequences for the international economic environment. The recession has resulted in large output gaps, that is, differences between actual and potential output. Re-establishing growth requires, as a first stage, closing of the output gaps. It is also clear – though current information is not so precise – that potential output and growth have also been affected by the crisis and recession. The second stage in the process for catching-up by the CESEE economies must then focus on growth prospects on the supply side, that is, potential output. The first part of this chapter discusses the experience from earlier financial crises, using the 1990s crisis in the Nordic countries – that is, in Finland and Sweden (and also partly Norway), one of the biggest crises in advanced economies since the 1970s – as a ‘case study’. This case is worth considering because the crisis resolution in the Nordics was successful and thus some general lessons can perhaps be learned. The second part of my remarks addresses some ideas and principles that the CESEE countries may want to consider when they reformulate their catching-up processes after the current crisis. 2 THE NINETIES CRISES IN THE NORDIC COUNTRIES The fundamental reason for the financial crises of the Nordic countries lies in the financial liberalization in the 1980s. This process created a boom and...
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