Finnish and Swedish business cycles in a global context

TY - JOUR

T1 - Finnish and Swedish business cycles in a global context

AU - Bergman, Ulf Michael

N1 - JEL Classification: E32, F41

PY - 2008

Y1 - 2008

N2 - 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.

AB - 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.

KW - Faculty of Social Sciences

KW - World business cycles

KW - European business cycles

KW - symmetry and comovement of cycles

U2 - 10.1007/s10368-008-0108-x

DO - 10.1007/s10368-008-0108-x

M3 - Journal article

SN - 0020-5230

VL - 5

SP - 49

EP - 69

JO - International Economics and Economic Policy

JF - International Economics and Economic Policy

IS - 1-2

ER -