Finnish and Swedish business cycles in a global context

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Abstract

This paper evaluates the decisions made by the Finnish government to join EMU and the Swedish government not to join EMU in the early 1990s. Focusing on the characteristics of business cycles during the postwar period, we find that output fluctuations in Sweden and Finland are correlated to two measures of the international business cycle, a European and a non-European cycle. The Finnish cycle has become more synchronized to the European cycle but less synchronized to the non-EU cycle after 1999. For Sweden we find the opposite result. The decision by the Finnish government to join EMU on schedule is justified ex post but was not justified ex ante. Similarly, the decision by the Swedish government not to join EMU in 1999 seems to be justified ex post but was not justified ex ante. Our empirical evidence suggests that economic decisions based on historical data may not be optimal ex ante but they may be defensible ex post.
Original languageEnglish
JournalInternational Economics and Economic Policy
Volume5
Issue number1-2
Pages (from-to)49-69
Number of pages21
ISSN1612-4804
DOIs
Publication statusPublished - 2008

Keywords

  • Faculty of Social Sciences
  • World business cycles
  • European business cycles
  • symmetry and comovement of cycles

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