Kiss me deadly: From Finnish great depression to great recession

Arbeitspapier

We investigate the causes of the Finnish Great Depression, 1990-1993. We find that the collapse of the overheated financial and banking sectors starting in 1989 was the trigger of the economic crisis. Foreign shocks, which include the collapse of trade with USSR in 1991, can account for at most about half of the slump, and these shocks occurred only when the economy was already in free fall. Also, the deleveraging and restructuring process of the financial system substantially prolonged the subsequent recovery. Our methodology involves estimating a structural VAR model with sign and exogeneity restrictions. Importantly, we are able to distinguish between financial shocks affecting the demand for intermediated loans and those shifting the loan supply curve. Hence we also contribute to the discussion on which financial shocks actually matter.

Object Details

• ISBN: 978-952-323-001-9
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bank of Finland Research Discussion Papers ; No. 24/2014

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Financial Markets and the Macroeconomy ; Economywide Country Studies: Europe
• Subject: business cycles ; great depressions ; financial shocks ; sign restrictions ; Finland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gulan, Adam ; Haavio, Markus ; Kilponen, Juha
• Event: Veröffentlichung
• (who): Bank of Finland
• (where): Helsinki
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/212299
• Last update: 10.03.2025, 11:42 AM CET