1 / 27

Lessons from Financial Integration and Crises in Scandinavia

Explore the Nordic countries' financial history from a successful post-WWII era to a crisis, offering valuable lessons for liberalization and crisis management. This paper delves into Nordic financial integration, crisis avoidance strategies, and long-term effects of financial policies.

dianegibson
Download Presentation

Lessons from Financial Integration and Crises in Scandinavia

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Lessons from financial integration and financial crises in ScandinaviaPrepared for the 13th Dubrovnik Economic Conference, June 27 - June 30, 2007, Dubrovnik, Croatia, organized by the Croatian National Bank Lars Jonung, DG ECFIN, Brussels The views expressed are my own and should not be attributed to the European Commission

  2. Why look at the Nordics? • Four laboratory experiments • Pioneers in engineering financial crisis • Open and transperant policy process • Crisis in a welfare state

  3. The macroeconomic record of Denmark, Finland, Norway and Sweden – the Nordic or Scandinavian countries – used to be regarded as a successful one during the post-World-War-II period.Then came the great financial crisis

  4. The Nordic boom phase about 1985-90. A stylized picture.

  5. The Nordic bust phase about 1990-93.A stylized picture.

  6. Ratio of bank loans to GDP

  7. Real estate prices • 1990 = 100

  8. The case of Denmark – the great exception: • Why no banking crisis? (still banking problems) • Tight fiscal policy – credible exchange rate • More financially integrated • Earlier financial liberalization • Well capitalized banks

  9. Lessons from the Nordic experience of financial integration • Lessons on how to liberalize while avoiding a financial crisis • Lessons on how to deal with a crisis • Lessons on the long-run effects of financial integration

  10. How to avoid a crisis … • Lesson no 1: • The power of financial markets • (of the real rate of interest)

  11. How to avoid a crisis … • Lesson no 2: • The dangers of financial ignorance

  12. How to avoid a crisis … • Lesson no 3: • The dangers of backward-looking policy behaviour

  13. How to avoid a crisis … • Lesson no 4: • The dangers of procyclical monetary policy

  14. How to avoid a crisis … • Lesson no 5: • The dangers of procyclical fiscal policy

  15. How to avoid a crisis … • Lesson no 6: • The sequencing of financial reforms

  16. How to avoid a crisis … • Lesson no 7: • The inadequacy of micro-prudential financial supervision

  17. How to deal with a crisis … • Lesson no 8: • The importance of resolution policies

  18. How to deal with a crisis … • Lesson no 9: • The inadequacy of the lender-of-last- resort function of central banks

  19. How to deal with a crisis … • Lesson no 10: • The inadequacy of the advice from the IMF

  20. The long-run effects of financial integration … • Lesson no 11: • Financial liberalization changes the monetary and fiscal regime

  21. The long-run effects of financial integration … • Lesson no 12: • Financial liberalization has far- reaching effects – inside as well as outside the financial system

  22. The long-run effects of financial integration … • Lesson no 13: • Financial crisis may be costly in the short run and beneficial in the long run

  23. The long-run effects of financial integration … • Lesson no 14: • Financial liberalization does not necessarily lead to deep crisis

  24. Lessons from other financial crises: • What is specific with Scandinavia?

  25. Any novel message? • The long-run effects of financial integration are not as dramatic as the short-run effects, but they have proved to have greater importance over time.

  26. When is the next crisis? • “it could not happen here – again” • The future will show

  27. Lessons from financial integration and financial crises in ScandinaviaPrepared for the 13th Dubrovnik Economic Conference, June 27 - June 30, 2007, Dubrovnik, Croatia, organized by the Croatian National Bank Lars Jonung, DG ECFIN, Brussels The views expressed are my own and should not be attributed to the European Commission

More Related